XPeng’s stock has been on a rollercoaster, soaring more than 50% in the last month. The surge is driven by robust September deliveries and a Chinese government stimulus package that lifted stocks in the country. However, the stock’s valuation is a cause for concern, now trading above Wall Street’s consensus price target and at a premium to its peers. Despites the positive trends, a neutral stance on XPEV might be wise.
Exploring XPeng’s Roots
XPeng, a Chinese electric vehicle (EV) company established in 2014, has swiftly carved a niche in the EV sector. The stock, along with its peers, surged during the pandemic, attracting significant investments into the industry.
However, investor enthusiasm waned post-pandemic, leading to a Hold rating on XPEV due to its volatile nature, highlighted by a Beta of 1.83 over 24 months. Despite facing challenges in 2022 and early 2023, the stock has shown resilience in 2024, rallying over 70% in the last three months.
XPeng boasts a suite of smart electric vehicles, including SUVs and saloons, delivering impressive range capabilities. Notably, the G6 SUV offers ranges of up to 550 kilometers on a single charge, on par with industry leaders like Tesla. Moreover, its rapid charging feature from 10% to 80% in 18-20 minutes outperforms many competitors.
The Forces Behind XPeng’s Rally
Several factors are fueling XPeng’s recent surge. The Chinese government’s economic stimulus plan, aimed primarily at reviving the property market and enhancing social security benefits, has buoyed stocks in China. The Hang Seng index has soared more than 25% over the past month due to this initiative.
Additionally, XPeng’s record-setting vehicle deliveries in September, reaching 21,352 units with a 39% year-over-year increase, have been pivotal. The launch of new models, notably the XPeng MONA M03 with over 10,000 deliveries in its inaugural month, has further bolstered the stock. Peers such as Li Auto also experienced favorable outcomes in September, providing additional sector-wide momentum.
Analysts have turned increasingly bullish on XPeng, with JPMorgan upgrading the stock to Overweight status, foreseeing a surge in quarterly deliveries and predicting sales volume to hit 300,000 units by 2025.
Evaluating XPeng’s Performance
Despite positive projections, XPeng has trailed its peers in recent periods. Year-to-date, the company has delivered 98,561 vehicles, up 21% from the previous year. Comparatively, Li Auto reported 152,831 deliveries in the third quarter, marking a 45.4% upsurge year-over-year. While Nio saw a modest 11.6% increase in deliveries, it started from a higher base at 61,855 units.
Although past performance does not assure future outcomes, XPeng’s underwhelming track record raises apprehensions among investors regarding its unfulfilled potential.
Is XPeng Stock Overvalued?
XPeng remains unprofitable, and despite expectations of delivering 300,000 units by 2025, profitability seems distant. Analysts foresee persistent but improving losses over the next few years.
Currently trading at about 2.1x forward sales, XPeng maintains nearly a 150% premium over the consumer discretionary sector. This valuation also exceeds that of peer companies in terms of forward P/S multiples, with Rivian, Nio, and Li Auto trading at 2.03x, 1.52x, and 1.54x respectively. Tesla’s exceptional outlier status, trading at a forward P/S of 8.62x, makes XPeng’s premium more apparent.
Analyst Consensus on XPeng Stock
On TipRanks, XPeng garners a Moderate Buy rating based on seven Buy, two Hold, and one Sell recommendations from Wall Street analysts in the last three months. The average price target for XPEV stock is $11.55, over 10% below the current trading price.
Summary on XPeng’s Trajectory
Despite lagging behind peers historically, XPeng’s recent surge might be premature. With profitability on the horizon, the stock’s current premium valuation suggests caution. However, the success of the MONA M03, contributing significantly to September deliveries, hints at a potential upward trend to watch closely.