It appears that Xpeng (NYSE:XPEV) stock is very unlikely to be hurt by China’s recent crackdown on some of the nation’s tech companies.
Meanwhile, the automaker’s orders continue to be very strong, and its opportunity in Europe has strengthened meaningfully.
Given these points, I continue to recommend that investors buy XPEV stock.
The evidence indicates that China began taking measures against certain tech companies after Alibaba (NYSE:BABA) CEO Jack Ma harshly criticized the country’s financial system in November 2020.
I’ve theorized that Beijing is looking to rein in and intimidate tech companies that could pose a threat to its rule, either because of their massive amounts of money, their direct access to many tens of millions of consumers or both.
The ruling Chinese Communist Party has launched repressive measures primarily against companies that have a great deal of money and access to hundreds of millions of consumers.
In addition to massive companies like Tencent (OTC:TCEHY)and Didi (NYSE:DIDI), those that don’t have as much money but could influence many tens of millions of Chinese citizens, like video game makers and tutoring services, have come under fire as well.
Xpeng does not fit in either of those categories. As of the end of the first quarter, it had $33.55 billion of cash. That, in my opinion, is not nearly enough money to worry Beijing. Xpeng delivered slightly more than 13,300 electric vehicles in Q1, so the company does not have access to enough consumers to worry China’s leaders.
Moreover, I believe that Beijing wants to bolster the country’s labor-intensive, lucrative EV producers.
The sector, after all, could very well ultimately create millions of jobs, generate meaningful export revenue for the country, and greatly increase its prestige overseas.
A Closer Look at XPEV Stock
A proposal by the EU’s European Commission, the bloc’s executive branch, would ban the sale of vehicles that are not completely electric by 2035.
If implemented, the decision would increase Xpeng’s opportunity in Europe starting towards the middle or the end of this decade. The Chinese automaker already has a foothold in Europe, having shipped a number of its EVs to Norway late last year. Xpeng is looking to make its way into additional countries in Europe.
Meanwhile, Xpeng’s growth in its home market continues to be impressive.
In July, the company’s deliveries soared 228% year-over-year, exceeding 8,000. Through the end of July, the automaker’s 2021 deliveries had ballooned nearly 400% YOY, reaching almost 38,800.
In her July 28 article, another InvestorPlace columnist, Vandita Jadeja, noted that Xpeng’s extremely strong delivery numbers have positioned it very well to report stronger-than-expected Q2 results. Since Xpeng reported its Q1 results on May 13, the automaker is likely to unveil its Q2 earnings sometime later this month.
Analysts Remain Upbeat
For the most part, analysts appear to be bullish on XPEV stock. For example, on August 4, Daiwa started coverage of the company’s shares that are listed in Hong Kong. The firm expects the company to be at the forefront of the development of advanced driver-assistance systems (ADAS).
What’s more, Daiwa thinks that the automaker will become profitable next year.
Also bullish is Citi. On July 2, the firm predicted that the EV space’s beta re-rating has just started recently with more potential positives to come. Xpeng will unveil additional upbeat drivers in the second half of this year.
The Bottom Line on XPEV Stock
Beijing will probably not interfere with Xpeng, and the automaker continues to benefit from explosive growth. Additionally, the firm has multiple, positive catalysts on the way.
Given these points, XPEV stock is very attractive for medium-term and long-term investors.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.
