XPeng (XPEV) stock has experienced a remarkable surge, climbing more than 50% in the last month. The rapid upswing can be attributed to a combination of factors, such as improved delivery numbers in September and a stimulus package initiated by the Chinese government, propelling stock markets in the world’s second-most populous nation. Despite encouraging business signals, concerns arise about XPEV stock’s valuation, with the share price now exceeding the consensus Wall Street price target and trading at a premium compared to its counterparts. While the landscape holds promise, my stance maintains a neutral outlook on XPEV.
An Insight into XPeng
Founded in 2014, XPeng is a notable player in the Chinese electric vehicle (EV) sector. The company swiftly established its presence in the EV market, drawing attention during the pandemic along with its peers as investments poured into the industry.
Although investor enthusiasm dwindled post-pandemic, recent signs hint at a revival. My rating for XPEV hovers at a Hold, given its volatile nature, reflected in its 24-month Beta of 1.83, surpassing that of peers like Nio (1.34). After a robust IPO in 2020, the stock grappled with challenges in 2022 and early 2023. However, it displayed signs of resurgence in 2024, with over a 70% surge in the past three months.
XPeng presents a suite of smart electric vehicles, featuring SUVs and saloon cars, boasting impressive claimed range capabilities. For example, the G6 SUV touts ranges of up to 550 kilometers on a single charge, aligning it with industry leaders like Tesla. Additionally, its rapid charging times, taking just 18-20 minutes to charge from 10% to 80%, outperform many competitors.
Unpacking the Surge in XPeng Stock
The recent spike in XPeng’s stock is underpinned by several factors. The Chinese government’s rollout of an economic stimulus initiative aimed at aiding the nation’s struggling property market has sparked a significant market upturn. Subsequently, the Hang Seng index surged by over 25% in the last month.
Moreover, XPeng witnessed remarkable vehicle deliveries in September, setting a new high of 21,352 units, marking a 39% year-over-year increase. This spike was bolstered by the successful debut of new models, notably the XPeng MONA M03, surpassing 10,000 deliveries in its inaugural month. Concurrently, industry counterparts such as Li Auto also exhibited strong performance in September, further fortifying the sector’s stocks.
Analysts have also taken a more bullish stance on the stock. JPMorgan recently upgraded it to Overweight, foreseeing a substantial surge in quarterly deliveries and predicting sales volume to hit 300,000 units by 2025.
Assessment of XPeng’s Performance
Despite optimistic forecasts, XPeng has lagged compared to its peers in recent periods. This year, the company delivered 98,561 vehicles, marking a 21% annual increase. Third-quarter deliveries stood at 46,533, a 16.3% year-over-year improvement. In contrast, Li Auto reported 152,831 deliveries for the quarter, representing a 45.4% surge year-over-year. While XPeng is not leading the pack, Nio’s quarterly deliveries showed an 11.6% boost year-over-year, albeit from a higher base of 61,855 units.
While past performance is not a definitive indicator of future results, the performance trend is noteworthy. Many investors are yet to see XPeng fulfill its growth promises.
Evaluating the Valuation of XPeng Stock
XPeng is not currently profitable, and despite JPMorgan’s optimistic prognosis of achieving an annual delivery of up to 300,000 units by 2025, a clear path to profitability remains elusive. Analysts following the stock anticipate ongoing losses albeit with some improvement until 2026.
Trading at roughly 2.1x forward sales, XPEV stock carries a premium of nearly 150% over the consumer discretionary sector at large. Similarly, it overshadows peer companies in terms of forward P/S ratio, given that Rivian, Nio, and Li Auto trade at 2.03x, 1.52x, and 1.54x respectively. In contrast, Tesla commands a forward P/S ratio of 8.62x, standing out as an exceptional deviation.
Analysts’ Perspective on XPeng Stock
On TipRanks, XPEV carries a Moderate Buy rating based on seven Buys, two Holds, and one Sell rating from Wall Street analysts in the recent three-month period. The average price target for XPEV stock is $11.55, slightly over 10% below the prevailing trading price.
Final Thoughts on XPeng
While XPeng has trailed its peers in recent years, the recent stock surge is based on limited data presently available. With profitability forecasts uncertain in the near term, enthusiasm regarding XPeng remains tempered. Furthermore, the stock’s valuation at a premium compared to most peers suggests a possibly overbought scenario.
Nevertheless, investors may find solace in the performance of the MONA M03, which accounted for almost half of the total vehicles delivered in September. This emerging trend merits close observation.