It hasn’t been a great 2024 so far for Chinese EV maker XPeng (NYSE:XPEV), which has witnessed a steep 40% decline in its shares since the year began. However, could a positive shift in investor sentiment be on the horizon following the company’s latest quarterly results?
With Q1 deliveries for 1Q24 already announced at 21,821 units, the company generated revenue of $910 million, amounting to a 62.3% year-over-year increase while beating the Street’s call by $60.08 million.
On the margin front, high-margin tech service revenue pushed the blended gross margin up by 670bps sequentially to 12.9% as the technical R&D service revenue correlated to XPeng’s collaboration with Volkswagen made its impact felt. This represented the highest gross margin level seen since 3Q22, even in the face of the elevated competition in the Chinese EV market.
On the bottom-line, adj. EPADS of -$0.21 fared better than the analysts’ call – by $0.03.
Moving forward, the company anticipates Q2 deliveries between 29,000 to 32,000 units, amounting to a 25% to 38% increase compared to the same period a year ago, and representing acceleration on the 19.7% improvement seen in Q1.
Scanning the results, it’s the unexpected impact from the Volkswagen collaboration which informs Deutsche Bank analyst Edison Yu’s take.
“XPeng positively surprised with the speed and magnitude of its VW tech service revenue stream which could surpass 1bn RMB this year by our estimates, generating >90% gross margin,” Yu said. “As a result, the structural profitability of the company looks materially better in the near-term, enabling margins to essentially decouple from the aggressive pricing pressure rampant in the China auto market. In terms of volume, 2Q looks better than feared with a very back end loaded ramp in the 2H driven by MONA and new B-class sedan. We raise our margin forecast for 2024E while maintaining deliveries.”
To this end, Yu rates XPEV shares as a Buy, while his $12 price target factors in one-year returns of 37%. (To watch Yu’s track record, click here)
Overall, the bulls dominate the XPEV discussion on Wall Street, despite some resistance. Based on a mix of 8 Buys, 4 Holds and 2 Sells, the analyst consensus rates the stock a Moderate Buy. Going by the $12.16 average price target, a year from now, investors will be sitting on returns of ~39%. (See XPEV stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
