It’s not every day that stock traders are confronted with an ideal setup. There might be one happening right now, though, as there’s good news to report for XPeng (NYSE:XPEV), but the share price is far off of its peak. After gathering the relevant facts and data about XPeng, I am bullish on XPEV stock and considering how to capitalize on this situation.
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XPeng is a China-based electric vehicle (EV) manufacturer. Now, I know what you may be thinking. EV sales in China are slowing down; there’s no denying that this is true. On the other hand, sales of new energy vehicles (NEVs) increased by 37.5% in the first two months of 2024.
In other words, there’s still a thriving EV market in China, and as we’ll see, XPeng hasn’t had any problem generating revenue from this industry. So, keep an open mind, and think of XPEV stock as a comeback candidate that some market participants are missing out on.
XPeng Jumps Headfirst Into the EV Price War
There’s a price war happening in the EV industry, and it’s definitely not limited to the U.S. China’s automotive shoppers want a good deal as much as anyone else on the planet. Therefore, it makes sense that XPeng should offer one or more highly affordable EV models.
As it turns out, that’s exactly what XPeng is doing. While XPeng might be thought of as a premium EV brand, the company is evidently still willing to be flexible with its pricing. Specifically, XPeng disclosed its plans to launch new EV models within the next month, to be priced between 100,000 yuan and 150,000 yuan, which would equate to $14,000-$21,000.
According to Fortune, XPeng’s new EV models will be “50% cheaper than other premium models on the market” and “around half the price of the 200,000 to 300,000 yuan ($28,211-$42,317) range common for premium models today.” Truly, this is a bold move for XPeng, and it could force competing automakers to lower their own vehicle prices.
Sure, XPeng could have continued to cater to upscale car buyers. However, these new vehicle models will enable XPeng to enter into the mass market for EVs. Some buyers who have never thought about buying an EV before might give XPeng a try and become lifelong customers.
We’ll all just have to wait and see how this pans out. XPeng’s margins will probably decline for a while, but the company can always raise its prices if the new vehicles are big sellers.
XPEV Stock Fell Despite XPeng’s Excellent Results
It’s true that XPEV stock was in the red today for a bit, but does this mean XPeng’s fourth-quarter Fiscal Year 2023 results were bad? Not at all, and perhaps short-term traders just weren’t in the mood to buy risk-on assets, which isn’t XPeng fault.
I see a strong setup, as XPeng stock has been cut in half since August of last year, while at the same time, XPeng is a powerful revenue grower. Believe it or not, the company’s revenue jumped 53% quarter-over-quarter and nearly 154% year-over-year to the equivalent of $1.84 billion in Q4 FY2024.
In terms of quarterly earnings, XPeng isn’t perfect, but the company is improving. The consensus estimate called for XPeng to have reported a Q4-FY2024 net loss of $0.41 per share, but the actual result was only a loss of $0.28 per share. Furthermore, this result indicates both a quarter-over-quarter and year-over-year improvement.
Here’s where the rubber really meets the road, though. Amazingly, XPeng delivered 60,158 vehicles in the fourth quarter, up nearly 171% year-over-year. This data point supports the idea that China’s EV market, although it certainly faces challenges in 2024, is doing better than the skeptics might assume it is.
At the very least, XPeng’s management appears to be confident about the future. The automaker reportedly plans to introduce 10 new vehicle models during the next three years. This is a sign of optimism from a company that’s clearly in growth mode.
Is XPeng Stock a Buy, According to Analysts?
On TipRanks, XPEV comes in as a Moderate Buy based on four Buys, three Holds, and one Sell rating assigned by analysts in the past three months. The average XPEV stock price target is $12.75, implying 26.3% upside potential.
Conclusion: Should You Consider XPeng Stock?
After XPeng’s earnings beat, which indicated robust revenue growth, how should the market react if it’s rational? The response ought to be positive, and XPeng stock still has plenty of overhead room to rally.
Frankly, it’s surprising that the XPeng share price is barely above $10. Maybe investors are still concerned about China’s EV market. They should change their attitudes, though, especially after viewing XPeng’s quarterly results and learning about the company’s upcoming EV models. That’s why I’m considering XPEV stock today and preparing for a large upward move by the end of 2024.
