Chinese EV Maker XPeng Looks Poised to Rally

The last six months  have been brutal for U.S.-listed Chinese stocks. The group’s most well-known firm, Alibaba (NYSE:BABA), has collapsed. Its shares have lost 50% of their value over the past year amid government crackdowns, regulatory worries, and a sharp decline in its profits. And most leading Chinese tech and internet companies have plunged in 2021. XPeng (NYSE:XPEV) stock, however, has largely bucked the trend.

Xpeng logo and P7 model in store XPEV stock

Source: Andy Feng / Shutterstock.com

XPeng’s superior fundamentals have helped it to avoid the malaise. Unlike so many other electric vehicle (EV) companies, XPeng already has a proven business model. The company will generate more than $3 billion in revenues in its fiscal 2021. Analysts, on average, expect its sales to jump to $5.7 billion next year and $8.7 billion in FY23.

That stands in stark contrast to so many EV firms, which have little more than a prototype and a flashy investor deck to show investors. XPeng has already proven that there is real demand for its vehicles and that its addressable market is growing.

As a consequence, XPEV stock has held up better than most of its peers lately. And while the shares dipped recently, partly due to the latest concerns about Chinese stocks being delisted, there is reason to expect that concern to blow over.

Morgan Stanley Likes XPEV Stock Into Year-End

Morgan Stanley analyst Tim Hsia expects Xpeng’s shares to be boosted by a December rally.

Noting that XPeng’s shares are also listed in Hong Kong, Hsia believes that fact insulates the company from some of the risks faced by other Chinese stocks that trade in the U.S. After all, since the automaker’s  shares are already listed on a prominent Asian stock exchange, it will be in a relatively good position if it is forced to leave the New York Stock Exchange.

As for Xpeng’s business itself, Hsia remains upbeat on its outlook. It’s not hard to see why, given the excellent trajectory of the company’s vehicle deliveries. If the negative sentiment towards Chinese stocks diminishes a bit, Xpeng should rally, especially since it has its Hong Kong shares to fall back on .

Accelerating Deliveries

XPeng is having a tremendous year. Actually, the company’s deliveries are now growing at a nearly exponential rate. In November, the company delivered 15,613 smart EVs to its customers. That’s a large monthly total. It’s even more impressive when compared to Xpeng’s past delivery totals.

Xpeng’s deliveries soared  270% year-over-year in November versus the same month of 2020. And its sales grew 54% from October to November.

Automakers have had to curtail production due to the semiconductor shortage. But somehow XPeng has managed to sidestep these problems and put up some of the most impressive growth figures in the sector.

In 2021, XPeng has delivered more than 82,000 vehicles, representing a 285% jump versus the same period a year earlier. Say what you will about the macroeconomic and political challenges facing  XPeng, but it’s hard to criticize the company’s actual operating results. XPeng is firing on all cylinders.

Xpeng’s Bottom Line

Chinese stocks are in a complicated situation right now. They are facing all sorts of risks related to governance and transparency, not to mention the general concerns about Covid-19 and the slowdown of growth stocks. As a result of these issues, some Chinese stocks , such as Alibaba, are a total question mark at this point.

As Hsia points out, however, Xpeng looks like one of the best-positioned Chinese stocks to rally. There’s no large group of short sellers casting doubt on Xpeng’s fundamentals.

The automaker is not the flashiest Chinese tech firm. Right now, however,  being under the radar is a good place to be. Additionally, Xpeng ‘s shares  are already trading in Hong Kong, mitigating the potential impact of any further headlines about the potential delisting of Chinese stocks in the U.S.

In the long-run, there’s one more big obstacle for XPeng. Specifically, the firm is not yet profitable and  analysts, on average, see it continuing to generate operating losses through at least 2023.

For now, though, the company’s sparkling top-line growth should be enough to carry the day for those who are bullish on  XPEV stock, particularly in the short-term.

On the date of publication, Ian Bezek 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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.


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