On Thursday, JPMorgan (NYSE:JPM) shifted its stance on XPeng (NYSE: XPEV) stock, raising it from Neutral to Overweight and increasing its price target to $11.50, up from the previous $8.00. The revision is based on the anticipation of a significant boost in vehicle deliveries stemming from the launch of new models later this year.
The analyst from JPMorgan forecasts a substantial rise in XPeng's quarterly deliveries, from approximately 45,000 units in the third quarter of 2024, as per the company's guidance of 40,000 to 45,000 units, to an estimated 80,000 units in the fourth quarter of 2024. This surge is expected to be driven by the introduction of two new sedan models, the Mona M03 and the P7 plus, in the fourth quarter of 2024.
Looking ahead into 2025, JPMorgan projects that XPeng's sales volume could further increase to around 300,000 units, marking a 72% year-over-year growth from an anticipated 180,000 units in 2024. This optimistic outlook is tempered by the acknowledgement that competition in the sector may affect visibility of such growth.
The analyst also referenced a historical performance, noting that XPeng's stock had previously appreciated by 30% following the launch of the G6 sport SUV on June 29, 2023. This increase was attributed to multiple expansion, with the Price to Sales ratio climbing from approximately 1.9x in late June 2023 to around 2.5x before the announcement of a deal with Volkswagen (ETR:VOWG_p) on July 26, 2023. However, it was highlighted that consensus revenue estimates remained largely unchanged during that period.
JPMorgan's positive outlook on XPeng is a reflection of the company's potential to enhance its valuation multiple through new model releases and increased delivery volumes. The firm's analysis suggests that the share price of XPeng, along with its Chinese peers, is likely to respond to these factors moving forward.
In other recent news, Volkswagen's CEO Oliver Blume is grappling with Germany's IG Metall union over potential plant closures and the termination of a long-standing job security pact.
Amid high energy and labor costs affecting the competitiveness of the German industry, Blume is under pressure to make tough decisions, including a potential $5 billion investment in U.S. EV maker Rivian (NASDAQ:RIVN) and a partnership with China's Xpeng (NYSE:XPEV).
Meanwhile, Didi Global is close to finalizing a deal to divest its smart driving and cockpit assets to a subsidiary of NavInfo, AutoAi, for approximately $70 million. This move aligns with Didi's strategy to focus on its core ride-hailing business.
In the EV market, XPeng's shares have been adjusted by several firms. JPMorgan reduced its stock price target to $8.00 but maintained a Neutral rating, while BofA Securities cut the price target to $10 but preserved a Buy rating.
Bernstein SocGen Group also kept its Market Perform rating and $9.00 stock target. These adjustments followed XPeng's second-quarter results, which showed a 60% year-over-year revenue growth and a gross margin improvement to 14%.
Despite these positive indicators, XPeng posted a net loss of 1.29 billion yuan. These are recent developments shaping the future of these companies.
InvestingPro Insights
As XPeng (NYSE: XPEV) gears up for a pivotal year with new model launches, real-time data and insights from InvestingPro offer a deeper look into the company's financial health and market performance. With a market capitalization of $7.98 billion, XPeng holds a significant position in the automobile industry. Despite not being profitable over the last twelve months, the company's revenue growth has been impressive, with a 72.08% increase year-over-year as of Q2 2024. This growth trajectory aligns with JPMorgan's forecast for a surge in vehicle deliveries and sales volume.
InvestingPro Tips highlight that XPeng holds more cash than debt on its balance sheet, providing financial flexibility as it expands its product line. However, analysts have revised their earnings downwards for the upcoming period, indicating potential headwinds. The stock's high price volatility is also noteworthy; it has experienced a strong return over the last month, yet the price has fallen significantly over the last year, reflecting a complex investment landscape.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips (https://www.investing.com/pro/XPEV). These insights could be crucial in evaluating XPeng's potential to enhance its valuation multiple through strategic initiatives and market expansion.
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