Nearly a year after its initial public offering, Chinese electric vehicle maker XPeng (NYSE:XPEV) stock, or XMotors as it is known in the U.S., looks to have been a solid investment.
Since its IPO in August 2020, XPEV stock is up nearly 100%. Investors who bought shares on their first trading day and held onto them cannot be disappointed with the return generated to date.
In the past three months, XPeng stock has risen 22%. With the electric vehicle market within China and around the world expected to explode in the coming decade, XPeng, which is co-headquartered in Silicon Valley and listed on the New York Stock Exchange, looks poised to profit.
Hong Kong Listing
The current rally in XPEV stock has been sparked, in large part, by XPeng’s upcoming dual listing on the Hong Kong Stock Exchange in Asia. The company is planning to offer 85 million shares when it begins trading in Hong Kong.
XPeng has said that it plans to invest the proceeds from the Hong Kong IPO in the software and operating systems that power its electric vehicles. XPeng has said that it hopes the Hong Kong listing will raise $2 billion and plans to use the proceeds to expand the number of charging stations and stores it has in mainland China.
XPeng’s Class A ordinary shares are convertible with their American depositary shares (ADS) that are listed on the NYSE. The Hong Kong listing will see 95% of the shares go towards institutional investors and 5% to retail investors.
XPeng currently has a market capitalization of about $33 billion. In addition to electric vehicles, XPeng is also developing autonomous driving technologies. Within China, the company’s biggest competitors are Tesla (NASDAQ:TSLA) and NIO (NYSE:NIO).
The stock began trading in Hong Kong on July 7, and was added to the FTSE Russell global equity index on July 8.
Exceeding Targets
XPeng reported its highest-ever monthly deliveries in June of this year, reporting total electric vehicle deliveries of 6,565 units, an incredible 617% increase compared to deliveries in June 2020, and 15% growth from May of this year. The June deliveries consisted of 4,730 P7 and 1,835 G3 electric vehicle models made by XPeng.
The June results pushed XPeng’s electric vehicle sales to a record for the second quarter, having delivered 17,398 vehicles in the three months ended June 30, a 439% increase from the second quarter of 2020 when the pandemic hurt sales.
As of June 30, XPeng’s cumulative deliveries in this year’s first half totaled 30,738 vehicles, a 459% increase compared to the first six months of last year. The stronger-than-expected sales throughout this year’s first half are especially impressive as they come during a global shortage of semiconductor chips that has led more established automakers to curtail production and revise down their sales forecasts for this year.
Buy XPEV Stock
All Chinese stocks carry some risk. The regulatory environment in China is less developed than in the U.S. and fraud continues to run rampant through the country’s capital markets. Plus, Chinese authorities have a habit of turning on their most successful companies and cracking down on them in ways that hurt their business and share price. Just look what has happened with Alibaba (NASDAQ:BABA) and Didi Global (NYSE:DIDI).
Despite the risks, XPEV stock is worthy of investors money. To date, the company has managed to remain in the good graces of China’s government and investors. Strong sales and a dual share listing in Hong Kong have the stock rallying again.
And this is after the company’s share price has nearly doubled in less than 12 months. The fact that XPeng is co-headquartered in California and has a strong presence in the U.S. also helps to distinguish the company from a raft of other Chinese electric vehicle start-ups.
Evaluated in the current context, XPeng stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
