XPeng stock has been on a wild ride, soaring over 50% in the past month, much like a rollercoaster hurtling down a steep incline. The surge has been fueled by a myriad of causes, from enhanced deliveries in September to a shot in the arm from Chinese government stimulus. Yet, caution hangs heavy in the air like a thick fog over this newfound success, as the stock now hovers above the Wall Street price target consensus and luxuriates in a premium position relative to other market players. This buoyant situation prompts me to adopt a somewhat neutral stance regarding the future trajectory of XPEV.
Examining the Xpeng Phenomenon
Launched in 2014, XPeng emerged as a significant player in the Chinese electric vehicle (EV) domain. The company’s stock danced in lockstep with its counterparts during the pandemic, as liquidity cascaded into the sector. However, the fervor abated post-pandemic, casting shadows over the future. Presently, I maintain a cautious Hold rating. XPEV’s volatile nature is underscored by its Beta of 1.83 over 24 months, trumping peers like Nio at 1.34. After an impressive IPO in 2020, the stock grappled with trials in 2022 and early 2023. Nevertheless, a spark has been ignited in 2024, as witnessed by a 70% surge over the past quarter, akin to a phoenix rising from the ashes.
XPeng houses a captivating collection of smart electric vehicles, including SUVs and saloon cars, boasting striking range capabilities. For instance, the G6 SUV brags about a single-charge range of up to 550 kilometers, placing it shoulder to shoulder with industry pioneers like Tesla. Furthermore, the vehicle can recharge from 10% to 80% within a mere 18-20 minutes, trumping many contenders in the race.
The Resounding Surge of XPeng Stock
The recent surge in XPeng stock stems from diverse factors. China’s economic stimulus package, tailored to prop up the ailing property market, cascade financial backing to denizens, and bolster social security benefits for unemployed graduates, has propelled Chinese stocks to unprecedented heights. Presently, the Hang Seng, resembling a soaring eagle in flight, has leaped over 25% in the past month. Simultaneously, XPeng’s September vehicle deliveries painted a rosy picture, catapulting to an all-time high of 21,352 units, marking a 39% year-over-year ascent. This upswing was galvanized by the triumphant debut of new models, with the XPeng MONA M03 leading the charge with over 10,000 deliveries in its maiden month. Peers like Li Auto also rode the wave of success in September, providing a solid foundation for the sector’s stocks.
Analysts have also cast an optimistic gaze at the stock. JPMorgan recently upgraded XPeng to an Overweight rating, predicting a substantial surge in quarterly deliveries and envisioning sales volume to crescendo to 300,000 units by 2025.
XPeng’s Struggle for Ascendancy
Despite these optimistic forecasts, XPeng has grappled with relative underperformance vis-a-vis its peers in recent times. In the current year, XPeng delivered 98,561 vehicles, registering a 21% year-on-year uptick. Third-quarter deliveries stood at 46,533, a 16.3% year-over-year increase. Li Auto, in stark contrast, recorded 152,831 deliveries in the third quarter, marking a formidable 45.4% year-on-year growth. However, XPeng isn’t dragging at the heels. Nio’s deliveries for the quarter escalated merely by 11.6% year-on-year, albeit from a higher initial point of 61,855.
Although past occurrences don’t necessarily foreshadow future events, XPeng’s unfinished business rings loud and clear. Numerous investors would nod in agreement that XPeng is yet to fully unfurl its wings.
Is XPeng Stock Truly a Bargain?
XPeng, sadly, isn’t basking in profits, and despite JPMorgan’s sanguine forecast projecting the delivery of up to 300,000 units in 2025, a clear path to profitability eludes the eye. Analysts covering the stock foresee continued losses, albeit on a recovering trajectory, extending till 2026.
XPEV stock currently trades at approximately 2.1x forward sales, commanding an almost 150% premium to the consumer discretionary sector as a whole. This marks a premium position in terms of forward P/S ratios compared to its peer companies, with Rivian, Nio, and Li Auto trading at 2.03x, 1.52x, and 1.54x, respectively. In this soaring realm, Tesla stands as an anomaly, trading at a forward P/S of 8.62x.
Insights from Analysts: Should You Buy XPeng Stock?
On TipRanks, XPEV garners a Moderate Buy rating derived from seven Buy ratings, two Holds, and one Sell rating penned by Wall Street analysts in the past quarter. The average XPEV stock price target hovers around $11.55, representing a sliver lower than the recent trading price.
Final Thoughts on XPeng Stock
XPeng, though trailing behind its peers of late, has sprouted anew on a fairly shallow bedrock of data. With profitability remaining a distant dream in the foreseeable future, the allure of XPeng seems somewhat muted. Moreover, the stock’s premium valuation compared to most peers suggests an overheated market. Nevertheless, the ecstasy of investors is kindled by the remarkable performance of the MONA M03, with the vehicle commanding almost half of September’s deliveries. This captivating narrative warrants close observation, akin to watching the tide of a mysterious sea.
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