CFRA issued a rating change for XPeng (NYSE: XPEV), downgrading the electric vehicle (EV) company's stock from Hold to Strong Sell, while simultaneously raising the price target to $8.00 from $7.00. The revised target is based on the expectation of a 2025 consensus price-to-book (P/B) ratio of 2x.
The downgrade follows XPeng's Q2 2024 financial report, which showed a loss per share (LPS) of -CNY1.29, an improvement from the LPS of -CNY3.10 in Q2 2023. Despite this, CFRA anticipates that XPeng will continue to face significant challenges in the competitive EV market.
According to CFRA, XPeng's revenue growth is expected to continue, supported by increasing demand for electric vehicles. However, the firm believes that as EV adoption grows, competition will intensify with more traditional auto brands entering the market and rolling out their EV models, along with the presence of established Chinese EV brands.
The analyst from CFRA expressed concern over XPeng's ability to organically expand its market share, especially as industry peers are reducing prices to stimulate sales. This pricing strategy by competitors adds to the difficulties for smaller players like XPeng.
Further caution was advised by CFRA regarding XPeng's liquidity situation, citing the company's significant investments in research and development (R&D). Despite the challenges, CFRA maintains its LPS estimates for XPeng at -CNY7.96 for 2024 and -CNY5.25 for 2025. The firm's outlook reflects a cautious stance on XPeng's financial health and market position in the coming years.
In other recent news, Citi has updated its outlook on electric vehicle manufacturer XPeng Inc (NYSE:XPEV)., raising the price target to $10.30 from the previous $8.90 while maintaining a Neutral rating. This adjustment reflects the firm's anticipation of increased sales volumes and improved financial forecasts for the coming years. The robust order intake for the MONA M03, the expected launch of the P7+ model in the fourth quarter of 2024, and a potential pipeline of Extended Range Electric Vehicle (EREV) models slated for 2025 have contributed to this positive development.
Meanwhile, JPMorgan (NYSE:JPM) has upgraded XPeng's stock from neutral to overweight, anticipating a significant increase in vehicle deliveries due to the launch of new models later this year. The firm projects XPeng's sales volume to rise to around 300,000 units in 2025, marking a 72% year-over-year growth. However, it is important to note that competition in the sector may affect visibility of such growth.
Volkswagen (ETR:VOWG_p)'s CEO Oliver Blume is grappling with Germany's IG Metall union over potential plant closures and a potential partnership with XPeng. This development comes amid high energy and labor costs affecting the competitiveness of the German industry.
In other recent developments, Didi Global is nearing the final stages of discussions to divest its smart driving and cockpit assets to a subsidiary of NavInfo, AutoAi, for approximately $70 million. This move aligns with Didi's strategy to focus on its core ride-hailing business.
Finally, XPeng's second-quarter results showed a 60% year-over-year revenue growth and a gross margin improvement of 14%. Despite these positive indicators, XPeng posted a net loss of 1.29 billion yuan.
InvestingPro Insights
Recent InvestingPro data provides additional context to CFRA's analysis of XPeng (NYSE: XPEV). Despite the downgrade, XPeng's market cap stands at $10.71 billion, reflecting its significant presence in the EV market. The company's revenue growth remains strong, with a 72.08% increase over the last twelve months as of Q2 2024, aligning with CFRA's expectation of continued revenue growth.
However, XPeng's financial metrics reveal some challenges. The company's gross profit margin is low at 7.29%, supporting CFRA's concerns about competition and pricing pressures. An InvestingPro Tip notes that XPeng "suffers from weak gross profit margins," which could impact its ability to compete effectively in a price-sensitive market.
On a positive note, another InvestingPro Tip indicates that XPeng "holds more cash than debt on its balance sheet," potentially mitigating some of CFRA's liquidity concerns. This financial position might provide XPeng with some flexibility for continued R&D investments.
Investors should note that XPeng's stock has shown strong returns recently, with a 29.77% increase over the last month and a 61.67% gain over the past six months. This performance contrasts with CFRA's cautious outlook, suggesting that market sentiment may be more optimistic than the analyst's perspective.
For a more comprehensive analysis, InvestingPro offers 12 additional tips for XPeng, providing investors with a broader view of the company's prospects and challenges in the evolving EV market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.