Tuesday, BofA Securities updated its outlook on XPeng Inc. (NYSE:XPEV) shares, reducing the price target to $11.70 from the previous $12.70, while still retaining a Buy rating on the stock.
The adjustment follows XPeng's announcement of its latest smart driving system, which notably excludes LiDAR technology in favor of a pure vision solution, aimed at reducing production costs.
XPeng's upcoming P7+ model will be the first to forgo LiDAR, a move expected to result in lower production costs and a reduced average selling price (ASP) compared to its predecessor, the P7. Despite the lower ASP, the P7+ is anticipated to yield a higher gross profit margin (GPM) than the P7 model.
The company's strategic shift away from LiDAR technology is set to be fully implemented by 2025, with all XPeng electric vehicle (EV) models expected to perform XNGP functions—XPeng's autonomous driving feature—on highways and in urban areas without the need for LiDAR.
This transition is projected to further enhance XPeng's GPM starting in 2025, supported by higher sales volume, cost savings through joint procurement with Volkswagen (ETR:VOWG_p), and ongoing technological advancements.
In other recent news, XPeng Inc. has seen a shift in its stock rating from 'Sell' to 'Neutral' by Citi. The firm also raised the price target to HK$32.20, citing a stronger upcoming model cycle and the introduction of a new smaller car model as key reasons for the upgrade. Citi's analysis suggests a balanced risk-reward scenario in XPeng's current valuation.
However, the firm refrained from assigning a 'Buy' rating due to potential challenges, including tough battery electric vehicle (BEV) demand and supply dynamics, and a weak model cycle that is expected to persist until the fourth quarter of 2024.
In the first quarter, XPeng reported a significant year-over-year revenue increase of 62.3%, reaching approximately 6.5 billion RMB, largely due to increased vehicle deliveries and a rise in average selling price. The company's gross margin for the quarter also improved notably to 12.9%.
China's National Development and Reform Commission predicts a continued surge in the country's new energy vehicles demand, aligning with China's broader environmental goals and ambition to lead the global auto industry. This is expected to stimulate further development of electric vehicle infrastructure.
XPeng is preparing for the launch of its first low-end "Mona" branded car, which could potentially enhance its market presence. In the realm of autonomous driving, China has allowed a select group of automakers, including XPeng, to begin public road tests of level three autonomous driving technologies.
Barclays (LON:BARC) and Bernstein SocGen Group have maintained their respective underweight and market perform ratings on XPeng's stock, with price targets set at $8.00 and $12.00.
InvestingPro Insights
As XPeng Inc. (NYSE:XPEV) continues to innovate with its smart driving systems, the financial metrics and analyst insights provide a deeper understanding of its market position. According to InvestingPro data, XPeng holds a market capitalization of approximately $7.94 billion USD. Despite not being profitable over the last twelve months, the company has reported a robust revenue growth of 41.64% during the same period, indicating a strong expansion in sales. Furthermore, the company's strategic pivot away from LiDAR technology could potentially enhance its gross profit margins, which currently stand at 3.95%.
InvestingPro Tips highlight that XPeng holds more cash than debt on its balance sheet, suggesting a solid financial footing. Additionally, three analysts have revised their earnings upwards for the upcoming period, reflecting a positive outlook on the company's financial performance. For those interested in more detailed analysis, there are 12 additional InvestingPro Tips available that could provide further insights into XPeng's financial health and stock performance. Readers can access these tips and take advantage of a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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