Xpeng Motors Stock Price Forecast October 2021 – Time to Buy XPEV Stock?
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EV (electric vehicle) stocks have been weak in 2021 and most of them are in the red for the year. Chinese EV company Xpeng Motors (XPEV) is down almost 20% so far even as it has recovered significantly from the May lows.
What’s the forecast for XPEV stock now after having fallen over 50% from the 52-week highs? Let’s discuss
Xpeng Motors stock latest news
Today, Xpeng Motors released its October delivery report. The company delivered 10,412 cars in the month. The deliveries increased 199% year-over-year and 44% sequentially to hit a new record. Notably, the company’s stellar delivery report is coming at a time when fellow Chinese EV companies NIO and Li Auto have had to lower their guidance due to the global chip shortage situation.
In September, Xpeng Motors sold 7,512 P7 sedan, 2,656 G3 and G3i SUV, and 244 P5 sedans. The P5 was launched in September only and the deliveries would scale up in the coming months.
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XPEV deliveries
In the first nine months of 2021, XPEV delivered 56,404 vehicles which was over four times what it did in the corresponding period last year. EV companies have been ramping their production to meet the strong demand. Almost all the pure-play companies including Tesla maintain that they are capacity-constrained companies and can only sell as many cars as they produce.
Xpeng Motors earnings
The rising deliveries are leading to strong topline growth for Xpeng Motors and have also helped it improve on the margins. It posted a gross profit margin of 11.9% in the second quarter of 2021 as compared to a negative margin of 2.7% in the second quarter of 2020. The gross margin also improved sequentially as the Chinese EV maker had posted a gross profit margin of 11.2% in the first quarter.
As deliveries continue to rise and Xpeng Motors reaches economies of scale, the margins would expand further. The company is also looking at international expansion, and like fellow Chinese EV company NIO, it is entering the Norway market.
XPEV stock forecast
Wall Street analysts have a bullish forecast for XPEV stock and 15 of the 16 analysts polled by CNN Business rate it as a buy while one analyst has a hold rating. None of the analysts have a sell rating on the stock. Notably, Xpeng Motors has among the highest percentage of buy recommendations in the pure-play EV stock universe.
The stock’s median target price of $54.84 is a 54.3% upside over the next 12 months. Its street high target price of $71.91 is a premium of over 100% while the street low target price of $27.14 is a discount of 23.6%.
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.”
Brian Gu, president of Xpeng said last month that the company is “on the right side of regulations.” He added, “I think our industry actually is actually stated as industry that will be supported by the government. They see this as a critical infrastructure, as well as a critical component of growth for manufacturing, smart technology, and also carbon neutral agenda, which the government is pushing very hard.”
XPEV has ample cash to fund its growth. At the end of the second quarter, it had a cash pile of over $5 billion. Post that, the company has also raised another $2 billion from the Hong Kong listing. The cash would help the company aggressively chase long-term growth.
Risks of investing in XPEV stock
Like any other stock, there are risks associated with investing in XPEV as well. The stock is prone to a broader sell-off in growth and EV names, as we saw earlier this year. Also, being a Chinese company, there is a country risk, especially considering US-China tensions. Like all other Chinese companies, XPEV faces the risk of delisting in the US. However, the company has mitigated that risk by going for a dual listing in Hong Kong.
Xpeng Motors stock valuation
Xpeng Motors stock trades at an NTM (next-12 months) EV (enterprise value)-to-sales multiple of 6.92x which looks reasonable. The current valuations are at a discount to that of NIO as well as Tesla. Also, while the valuation multiples might seem high when looked at in absolute, they should be seen in the context of the strong growth that XPEV brings to the table.
Analysts expect the company’s sales to rise 217% in 2021 and 67% next year. Looking at the production ramp-up and entry into new markets, there looks potential for an upside surprise in 2022.
Should I buy XPEV stock?
Looking at the positive outlook for the electric vehicle industry and Xpeng Motors’ reasonable valuations, it looks like a good buy. The stock currently trades below the 100-day SMA (simple moving average) and the 50-day SMA, which has been a strong resistance. The stock is not looking very bullish on the charts. However, if you want to play the EV industry, XPEV looks like among the best stocks to buy for the long term.
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