Xpeng Motors Stock Price Down 46% in 2022 – Time to Buy XPEV Stock?

Despite the recent bounce back, US-listed Chinese stocks are still trading with a massive YTD loss. Xpeng Motors (XPEV) is no exception and the stock is down 46% for the year.

The stock closed flat in yesterday’s price action after it released its fourth-quarter earnings. Fellow Chinese EV (electric vehicle) maker NIO, which released its earnings last week saw a selling spree, and markets gave a thumbs down to its earnings. What’s the forecast for XPEV stock and is it a good buy in March 2022?

Xpeng Motors recent news

Xpeng Motors’ fourth-quarter earnings were better than expected. The company reported sales of $1.34 billion in the quarter while analysts were expecting the metric at $1.28 billion. Its per-share loss of 11 cents was lower than the 19 cents that analysts were expecting. However, its vehicle gross margin fell to 12% in the quarter, down from 14.4% in the third quarter.

In comparison, NIO posted a beat on revenues while missing bottomline estimates. NIO reported a gross margin of 17.2% in the fourth quarter which was similar to the corresponding quarter in 2020 but 310 points lower than the previous quarter. The company attributed the sequential fall in gross profit margins to the sales of regulatory credits in the third quarter which bumped up its margins in that quarter.

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Deliveries

Xpeng Motors delivered 98,155 cars in 2021, which was 263% higher than in 2020. The company outsold NIO in the year. NIO has been among the worst affected by the chip shortage and its production and delivery report have underwhelmed for the last few quarters.

Xpeng Motors’ first-quarter delivery guidance was also below par and the Chinese EV maker said that it expects to deliver between 33,500-34,000 vehicles in the first quarter of 2022. The company has already delivered around 19,100 vehicles in the first two months so it expects to deliver between 14,000-15,000 cars in March.

Chip shortage

Like fellow automakers, Xpeng is also grappling with the global chip shortage which is hampering its production. Commenting on the chip supply situation, the company’s CEO Brian Gu said, “We think the outlook for chip bottleneck will probably alleviate in the next one to three quarters. Hopefully by the end of the year or early next year we see a normalization of that situation.”

NIO stock also fell after earnings

NIO also provided tepid guidance. The company expects to deliver between 25,000-26,000 cars in the first quarter of 2022. It has already delivered 15,783 cars in the first two months of the year which would mean deliveries of only about 10,217 cars in March.

While Chinese EV companies provide conservative guidance unlike Tesla which aims for a higher number, the guidance nonetheless spooked markets. Over the next few days, we’ll get the production and delivery numbers from Tesla as well as Chinese EV companies.

Tesla is looking at a stock split

While Chinese EV stocks have sagged, Tesla has now turned positive for the year. The company is looking at another stock split. It had done its first stock split in 2020 after a breathtaking rally. Tesla stock soared 743% in 2020 and another almost 50% in 2021. The stock has given positive returns for the last five consecutive years. It is the only pure-play EV company that has turned sustainably profitable and has posted a net profit in all the quarters since Q3 2019.

Xpeng to launch G9 SUV in the third quarter

Xpeng Motors said that it would officially launch in G9 sedan in the third quarter of 2022. In its earnings release, NIO said that the deliveries of the ET7 sedan would begin on March 28 as planned while the deliveries of ET5 are expected to begin in September.

Notably, earlier this year, Tesla had said that it would delay the launch of new vehicles, including the Cybertruck to 2023. The company is looking to maximize the production of existing models amid the global supply chain issues. Tesla stock had tumbled after the earnings release.

Cost-push inflation

Xpeng Motors, like fellow automotive companies, is battling cost-push inflation. Prices of key raw materials like steel, aluminum, copper, lithium, nickel, and plastics have risen. This has prompted companies like Tesla and Rivian to announce price hikes. Tesla had announced multiple price hikes last year also. Xpeng Motors has also announced a price hike while NIO has ruled out one for the time being.

Notably, XPEV has raised prices twice this year. The first hike was to compensate for the lower China subsidies in 2022. Later it increased car prices by between 5-8% to make up for the higher input costs.

XPEV also listed in Hong Kong

Amid the delisting fears in the US, Xpeng Motors also listed in Hong Kong last year. The company also raised $2 billion from the listing and ended 2021 with cash of $6.83 billion. While NIO also listed in Hong Kong, the company did not raise cash in the process. However, the company has raised cash through multiple stock offerings. The company had $8.7 billion as cash at the end of 2021.

Xpeng Motors stock price forecast

Wall Street analysts have a bullish forecast for XPEV stock though. it has a median target price of $50 which is a premium of 84% over current prices. Its street high target price is $80 which is a premium of 194% over current prices. Of the 18 analysts covering the stock 16 rate them as a buy while two analysts have a hold rating.

Xpeng Motors long term forecast

The long-term forecast for Xpeng Motors looks positive looking at the impetus that China has provided for the electric car industry. While the country has cracked down on several industries, it hasn’t tinkered with the electric vehicle industry as it sees it as a strategic industry as part of its “Make in China 2025 program.”

XPEV has already started international operations beginning with Norway and also entered Denmark, Sweden, and the Netherlands this year. The company has outlined ambitious plans of selling half of its cars in international markets. While it may seem a tall task at this moment, it is very much achievable considering the impetus towards electric cars globally.

Should you buy XPEV stock?

Xpeng looks like a good Chinese EV stock to buy considering the strong growth outlook. The stock’s valuations also look reasonable and it trades at an NTM (next-12 months) EV-to-sales multiple of 2.6x. In the near term, shutdowns in China due to the COVID-19 outbreak is a risk for XPEV. However, the company’s long-term outlook looks bullish amid the pivot towards electric cars.

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