Electric vehicle maker XPeng (XPEV), recently posted its earnings report. While the news wasn’t exactly good, it was good enough for investors.
The company posted some excellent results and suggested that the good times wouldn’t slow down any time soon with future guidance. That’s encouraging news that leaves me at least somewhat bullish on XPeng. (See Analysts’ Top Stocks on TipRanks)
Looking at XPeng’s year-to-date stock chart suggests a potential opportunity on hand. While the company’s share price is significantly lower than it was this time last year, it’s been working to maintain a key level.
A year ago, XPeng closed just over $70. It immediately started a plunge thereafter, losing about a third of its value in roughly two weeks. Share prices leveled off before starting another leg down on Valentine’s Day.
Mid-May, though, kicked off a rally that lasted into July. Share prices held close to the $40 mark for several months after that.
However, in mid-October, the company started a new rally that brings us to today, where the share price is above the $50 mark. (See XPeng stock charts on TipRanks)
The latest news, which features the company’s earnings report, is almost completely good news. The company posted a loss of $0.27 per share. That’s higher than FactSet was looking for at $0.18 per share but was sufficiently small to beat estimates from other analysts looking for more profound losses. Revenue, meanwhile, was the real winner. The company posted $887.7 million, well above FactSet’s estimates of $788.8 million.
Even better was the company’s future outlook. XPeng expects to deliver between 34,500 and 36,500 vehicles in the fourth quarter. That’s up between 166% and 181.5% year-over-year and would also be a hefty increase from the 25,666 vehicles delivered in the third quarter.
Further, the company expects revenue to be better than double as well. Fourth-quarter revenue is expected to gain between 149% and 163% year-over-year.
Is It Positive or Just Less Negative?
It’s easy to see where XPeng investors’ interest comes from. Granted, posting a loss is never good news. It’s hard to reinvest negative profits. But it’s also good news when a company’s losses aren’t as bad as some feared they would be.
XPeng is certainly making and delivering vehicles. However, the amounts aren’t exactly that encouraging. Its delivery of 25,666 vehicles in the third quarter is minor at best against Tesla’s (TSLA) 241,300 during the same period. Neither of those are a patch on Ford (F) and its 400,843 delivered vehicles.
XPeng is no Tesla or Ford, nor does it claim to be. It’s still a minor electric vehicle producer, producing minor amounts of electric vehicles. This might go some way toward explaining why shares are still trading in the $50 to $60 range.
Better yet, XPeng is expanding its product line. The company recently showed off its G9 crossover SUV model at the Auto Guangzhou show, which will give it more to work within the European market.
One of the biggest problems electric vehicles have faced so far is how well they work in colder markets with snow and ice. Bringing out an SUV, with its higher wheelbase and greater weight, should go some way toward calming those concerns.
Wall Street’s Take
Turning to Wall Street, XPeng has a Strong Buy consensus rating, based on six Buys assigned in the past three months. The average XPeng price target of $64.33 implies 18.7% upside potential.
Analyst price targets range from a low of $50 per share to a high of $92 per share.
Concluding Views
There’s a lot to like about XPeng. It’s trading near the midpoints of its range, pushing the low price targets harder than the high. Results are already looking solid, losses notwithstanding. Better results are supposedly in the pipeline already.
Really, the only problem XPeng has right now is that there’s much competition in the field. It will have a tough time securing a market of any size. Legacy automakers are turning to electric vehicles in growing numbers. Several other firms are already producing them.
However, the company’s Chinese operations are certainly helpful—China is one huge market, after all—and the fact that it’s starting to expand worldwide can only help.
While there are potential problems ahead for the company, these must be balanced against everything going XPeng’s way already, which is the biggest reason why I’m moderately bullish on the company.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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