When it comes to Chinese electric-vehicle (EV) start-ups, most of the attention goes to Nio (NYSE:NIO) because its stock price went up so quickly. Meanwhile, some traders tend to ignore Xpeng (NYSE:XPEV), since the price action of XPEV stock hasn’t been quite as spectacular as that of Nio.
Moreover, Chinese electric SUV manufacturer Li Auto (NASDAQ:LI) is a strong competitor of Xpeng and of course, American EV juggernaut Tesla (NASDAQ:TSLA) tends to steal the spotlight from all of these companies.
In other words, Xpeng has a lot of competition and as a result, the company might seem like an also-ran. Naturally, the owners of XPEV stock want some of the same rocket fuel that powered those other companies’ stocks.
Unfortunately, the shares fell sharply after peaking in late November. This was surely demoralizing to the shareholders, so hopefully today I can present a compelling case in favor of this EV contender.
A Closer Look at XPEV Stock
Before most amateur retail traders even had a chance to own XPEV stock, Xpeng had already sold 100 million American Depository Receipts (ADRs) for $15 each, raising roughly $1.5 billion in the process.
The shares debuted on the New York Stock Exchange on Aug. 27 at $23.10. However, they closed slightly lower that day at $21.22.
The shares did have their time in the sun, as the stock rose to a 52-week high of $74.49 on Nov. 23. Unfortunately, however, that extremely optimistic phase didn’t last very long.
As of early-afternoon trading today, XPeng was trading around $44.40, a substantial decline from the November peak. The early shareholders are still doing quite well, of course. Yet the bulls need to step up their game and turn the price action back around.
Perhaps the encouraging words of a prominent analyst can give XPeng shareholders a much-needed shot in the arm.
The EV Fab Four
Hopefully, some of you will remember the rock band called The Beatles, also known as the Fab Four because it had four members. Well, apparently one analyst sees the Chinese electric-vehicle market as having four prominent members as well.
Deutsche Bank analyst Edison Yu identified his Fab Four as Nio, Li Auto, WM Motor Technology Group, and Xpeng. Yu offered high praise for these four China-based automakers.
Along with Tesla, Yu believes that the Fab Four “are increasingly destined to conquer the Chinese auto market, supported by an investor base who is eagerly willing to support this endeavor, leading us to expect multiple winners in the new EV world order.”
Indeed, there could be “multiple winners,” as Nio is not the only high-growth Chinese EV maker. According to Xpeng’s unaudited third-quarter fiscal results, the company delivered over 8,500 vehicles in Q3.
That data point represents a year-over-year increase of nearly 266%. It’s also an improvement of almost 166% over this year’s Q2.
Deutsche Bank’s Yu Offers Encouragement
Yu’s note is timely, as Xpeng’s stakeholders might have previously felt outclassed by the competition.
It’s great to hear a notable analyst giving Xpeng its proper consideration. In defense of his position, Yu asserted, “[W]e believe our thesis has been playing out both on the ground as sales and brand awareness grow, and in the capital markets where all four companies have seen their valuations rise considerably.”
With his note, Yu initiated coverage of XPEV stock with a “buy” rating. He furthermore assigned an ambitious price target of $58 to Xpeng.
And if the stockholders need more encouragement, they’ll be glad to know that Xpeng’s P7 sports sedan earned the Car of the Year 2021 award at the Xuanyuan Awards. This is significant as Xuanyuan is a highly prestigious annual award for Chinese automakers.
The Bottom Line
Times have been tough for XPEV stock holders lately. Its share price has declined, and other EV stocks seem to get more praise and attention.
Still, there’s no need to feel like a second-class citizen if you own the shares. All things considered, Xpeng deserves its place as a Fab Four Chinese EV maker.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
