On Wednesday, Citi updated its financial outlook for Xiaomi (OTC:XIACF) Corp (1810:HK) (OTC: XIACY), increasing the price target to HK$22.70 from HK$22.40 while sustaining a Buy rating on the stock. The adjustment follows Xiaomi's second-quarter results for 2024, which surpassed expectations, particularly in electric vehicle (EV) gross margins and other new initiatives. The company's internet service gross margins also exceeded forecasts.
Xiaomi's management emphasized several positive trends that are expected to continue, including gains in smartphone market share across different regions, increases in shipments, average selling prices, and margins for Internet of Things (IoT) products, and an anticipated improvement in EV gross margins in the second half of 2024.
Citi analysts project that smartphone margins will reach their lowest point in the third quarter of 2024 and that IoT will sustain gross margins of over 19%. Additionally, they estimate EV gross margins to be 18.0%, 18.3%, and 18.4% for the years 2024, 2025, and 2026, respectively.
The report highlighted the company's effective operational expense control and a gross margin of 15.4% for EV and other new initiatives as key factors contributing to the strong quarterly performance. Citi expects Xiaomi's share price to respond favorably to the significant EV margin beat.
Looking ahead, Xiaomi has potential catalysts that could further influence its stock performance, including the launch of the Mi 15 in October and details about the next EV model expected in the latter half of 2024. These developments could potentially drive momentum for the company's shares in the near term.
In other recent news, Barclays (LON:BARC) has launched coverage on Xiaomi Corp with an Overweight rating, setting a price target of $15.00. The firm underscored Xiaomi's remarkable expansion in gross margins for cellphones, which increased from 7.2% to 14.8% in the first quarter of 2024, significantly boosting the company's total gross margin.
Despite the potential for minor margin pressure due to escalating DRAM prices, Barclays expressed faith in Xiaomi's capacity to handle the short-term effects of component price variations.
This confidence stems from Xiaomi's demonstrated history of robust execution capabilities. Barclays also drew attention to Xiaomi's enterprise value, currently below $50 billion, and its trading at roughly 10 times its projected 2026 earnings per share (EPS). This valuation was deemed attractive by the analyst, indicating a positive perspective on the company's financial future.
InvestingPro Insights
As Xiaomi Corp (OTC: XIACY) continues to make headlines with its robust second-quarter results and promising outlook in the EV sector, insights from InvestingPro offer a deeper dive into the company's financial health and market position. With a market capitalization of $55.72 billion and a P/E ratio of 22.73, Xiaomi stands out as a significant player in the technology hardware space. Notably, the company holds more cash than debt, which is a strong indicator of financial stability, and has been identified by analysts as trading at a low P/E ratio relative to near-term earnings growth.
InvestingPro Tips highlight Xiaomi's competitive edge, including its status as a prominent player in the Technology Hardware, Storage & Peripherals industry and its low revenue valuation multiple. These factors, coupled with a revenue growth of 7.83% over the last twelve months as of Q1 2024, paint a picture of a company that's not only growing but also managing its finances prudently. Additionally, the company's cash flows are more than sufficient to cover interest payments, a reassuring sign for investors concerned about long-term sustainability.
For investors seeking more guidance, there are 11 more InvestingPro Tips available, providing a comprehensive analysis of Xiaomi's performance and potential investment opportunities. As Xiaomi gears up for upcoming product launches and further developments in its EV initiative, these insights could be invaluable for making informed investment decisions.
Discover additional expert tips and detailed analytics by exploring Xiaomi on InvestingPro: https://www.investing.com/pro/XIACY.
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