With its rapid growth and its electric vehicles (EVs) that sound impressive, Chinese EV maker Xpeng (NYSE:XPEV) could very well become the next Tesla (NASDAQ:TSLA). At the very least, I think Xpeng will become a strong rival to its American counterpart in some parts of the world. Consequently, I believe that longer-term, risk-tolerant investors should buy XPEV stock.
There’s no doubt that Xpeng’s deliveries and top line are expanding at breakneck speed. Last quarter, its deliveries soared 266% year-over-year and 166% versus the previous quarter to 8,578 units. Its revenue from the sales of its EVs soared 376% YOY to nearly $280 million, while its “revenues from services and others grew 80.8% to $13.6M.”
And importantly. the EV maker’s gross margin climbed to 4.6%, compared with -2.7% during the same period a year earlier.
Finally, Xpeng expects its deliveries to jump to about 10,000 vehicles in Q4.
Two Major Banks Are Bullish on Xpeng
JPMorgan’s Nick Lai was pleased with the company’s Q3 earnings. He said that all of the EV maker’s results came in above expectations. Lai expects the sales of the overall Chinese new-energy-vehicle (NEV) sector to jump by an average of 43% between now and 2025.
More critically, Lai predicts that Xpeng’s share of the Chinese NEV market will surge to 7% by 2025, up from 1% now. In other words, the analyst thinks that XPEV stock will deliver tremendous growth over the next five years. He kept a $43 price target and a “buy” rating.
Also upbeat on XPEV stock is Bank of America analyst Ming Hsun Lee. The analyst predicts that declines in the costs of the automaker’s batteries will cause its profit margins to climb. Lee has a $43 price target and a “buy” rating on the stock.
Favorable Reviews of Xpeng’s Vehicles
The three reviews of Xpeng’s vehicles that I found were generally quite favorable.
After examining videos made by a European reviewer who drove one of the company’s G3 crossover vehicles, InsideEVs called the vehicle “actually quite compelling.” The reviewer, Bjorn Nyland, “really seemed to like the G3” and determined that it has a range of 264 miles. That’s not too far below the “more than 300 miles” of range of Tesla’s crossover, the Model X, according to Edmunds.
Further, InsideEVs stated that “the overall impression is that the vehicle is very capable, it is packed with features, it’s practical and actually quite substantial.” The website also noted that the vehicle has “many gadgets (including a summon feature).”
After driving Xpeng’s P7 sports sedan, a CleanTechnica reviewer reported that it is “a pre-customized, souped up sporty car that you can tailor with voice controls or the touch of a touchpad (or occasionally a button).”
The author praised the vehicle’s many high-tech gadgets, quick acceleration, and “smooth” brakes. He added that the automobile was very “smooth” when performing a few tough maneuvers.
Less upbeat was The Drive, which noted “puzzling” aspects of the P7’s design, “a few worrisome issues of build quality,” and an overly “soft ride.” The reviewer also didn’t like the tires and said its brakes were weaker than Tesla’s.
Still, he praised the P7’s infotainment system and acceleration. Moreover, the reviewer concluded that the vehicle, which is cheaper than Tesla’s Model 3, “has perhaps 75 percent of the features and capability of a Tesla.”
The Bottom Line on XPEV Stock
Xpeng’s rapid growth, along with the mostly positive reviews of its vehicles, indicate that it is developing high-quality, appealing EVs. Further, I believe that its multiple, high-tech gadgets will appeal to many EV fans around the world. And, other aspects of its vehicles are likely to meaningfully improve going forward.
Given these points, I believe that its EVs will become very popular. XPEV stock has seen recent huge gains. And, it’s trading slightly above the bullish analysts’ price targets. I still that the shares, which currently have a market capitalization of $35 billion, will climb much higher over the long-term.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.