Amid banking sector anxieties, some of the global market’s attention shifted to China’s electric vehicle (EV) manufacturers such as Xpeng (NYSE:XPEV). Though XPEV stock popped up around 8% in early afternoon trading, significant concerns about viability jumped recently. Broadly, demand appears to be fading, causing analysts to trim their expectations for the sector.
Specifically, regulatory filings reveal that JPMorgan Chase (NYSE:JPM) reduced its long position in XPEV stock to 5.76% on March 14. Previously, the investment bank and financial stalwart held a 6.76% exposure to Xpeng. Despite the negative implications and wider challenges in the Chinese EV market, XPEV appears no worse for the wear. Over the past five days, it’s up 29%.
Nevertheless, JPMorgan doesn’t appear to stand alone in its cautionary take regarding XPEV stock. According to Simply Wall Street, while the 31 analysts covering Xpeng anticipate revenue of 36.3 billion CNY in 2023 — reflecting a 35% increase in sales over the trailing year — the forecast slipped from prior expectations of 45.4 billion CNY.
Further, covering analysts cut their price target 7.7% to $12.67 per share. This suggests that the declining revenue expectations, as well as Xpeng’s ongoing losses, contributed to the lower valuation estimate.
XPEV Stock Faces Broader Concerns
Notably, the latest trimming doesn’t represent the first time that JPMorgan took a dim view of XPEV stock. Earlier this year, analyst Nick Lai lowered his rating on Xpeng to “hold” from “buy” while also lowering his price target to $9 from $11.
At the time, Lai anticipated that Xpeng would lose ground. While most Chinese stocks received a boost from the underlying nation’s economic reopening, this narrative ran out of steam. Without this catalyst, XPEV stock doesn’t have much fuel besides raw speculation.
Further, regulatory filings revealed that in the fourth quarter last year, JPMorgan reduced its position in Xpeng by approximately 25%. Therefore, the pessimism toward the EV manufacturer didn’t materialize overnight.
Even more problematic, Investor’s Business Daily revealed that demand weakened in the Chinese EV market. This region represents the world’s biggest and fastest-growing arena for EVs. Specifically, the report mentioned that BYD (OTCMKTS:BYDDY) “scaled back production due to weaker industrywide demand in China since the start of the year,” according to insider sources interviewed by Reuters.
Notably, during this month, BYD began offering discounts for its bestselling Yuan Plus and Seal EVs. Presently, EV brands — including dominating force Tesla (NASDAQ:TSLA) — are locked in fierce competition to stay relevant in China. However, with the country experiencing a flood of new brands and models, circumstances could get ugly quickly for any competitor.
Why It Matters
While XPEV stock performed remarkably well in recent sessions, investors should be reminded that overall, the underlying company struggled badly. For all its upside moves, on a year-to-date basis, the stock is actually down almost 3%. And for the trailing one-year period, it lost nearly 64% of equity value.
On the date of publication, Josh Enomoto 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.
