XPeng (NYSE:XPEV) stock has tremendous growth potential as it is one of a handful of domestic players in China’s massive EV market.
XPEV reached an all-time high of $70 before settling down to around the $41 or so it trades at today.
While XPeng’s gains have stalled, its growth trajectory has not. The company’s recent results have been nothing short of spectacular.
I believe long-term investors should consider taking a position at these prices based on great Q1 numbers and potential for growth over the long haul.
In Q1 2021, Xpeng delivered 13,340 vehicles close to 5x the 2,271 vehicles it delivered at the same time last year. The company is continuing to build upon this strong momentum as total vehicles delivered in April reached 5,147 a 285.3% increase year over year.
Deliveries were roughly 60-40 between the Xpeng’s P7 sports sedan and its G3 compact SUV. The company was able to achieve these results amidst a backdrop of global supply issues with semi-conductors making it even more impressive.
Total revenue for the quarter was roughly $450.4 million, a 616% increase over the same period in 2020. At the end of the quarter, XPeng had a distribution and service network of 178 stores and 61 service centers, covering 70 cities.
The company expanded its charging network to 172 branded supercharging stations in 60 cities.
Gross profit per vehicle sales was positive for the quarter showing that XPeng is properly scaling its operations. Manufacturing relies heavily on economies of scale therefore the more vehicles the company sells the better its margin is.
Its vehicle margin in Q1 2021 was 10.1% an improvement from the negative margin in Q1 2020 and the 6.8% margin in Q4 2020.
Based on the company’s continued sales trajectory, I believe it will only be a matter of time before the company achieves profitability. The company recently unveiled a third production model positioned as a mass-produced sedan. This new model, the P5, will compete directly against Tesla’s (NASDAQ:TSLA)Model 3.
XPEV Stock and the Technological Edge
Apart from these impressive quarterly sales, XPeng continues to make strides with its technology. It is this technology that is specifically designed with the Chinese consumer in mind that could give the company a competitive advantage.
At the beginning of the year, the company unveiled a beta version of its highway autonomous driving solution. This Navigation Guided Pilot is part of the XPILOT 3.0 autonomous driving package.
This autonomous driving solution was specifically made to handle China’s difficult road environment. Drivers in China need to contend with a lot more difficult situations on the road such as construction sites, traffic jams, adverse weather and road accidents.
According to the company, its autonomous driving solution has a higher lane change success rate and less driver intervention required compared to its competitors.
XPEV has tested this technology with at least 3,000 km of highway driving proving its viability and has made tremendous strides with the roll-out of the XPILOT 3.0 as 96% of the total P7s delivered in Q1 2021 can support either XPILOT 2.5 or XPILOT 3.0.
Investor Takeaway
XPeng continues to impress me as management has been adept at executing its plans these last few quarters. The company continues to properly scale up its operations.
More importantly, I have been impressed with the company’s R&D as the capabilities of the XPILOT 3.0 are very impressive. At a fraction of the market value of Tesla, I believe XPeng is a solid buy.
On the date of publication, Joseph Nograles held a LONG position in XPEV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
