On Tuesday, Citi upgraded XPeng Inc (NYSE:XPEV). (H-Shares) (9868:HK) (NYSE: XPEV) from a 'Sell' to a 'Neutral' rating, while also increasing the price target to HK$32.20 from the previous HK$29.90. The adjustment was made on the basis of several factors that could influence the company's performance in the near future.
The investment firm cited a stronger upcoming model cycle as one of the key reasons for the upgrade. Additionally, the introduction of a new smaller car model is expected to boost the company's export capabilities. Citi also noted that the current valuation of XPeng's shares presents a balanced risk-reward scenario.
Furthermore, the firm has recently raised its forecast for battery electric vehicle (BEV) penetration in the market, which is anticipated to have a positive impact on XPeng's gross profit margin (GPM) and advanced driver-assistance systems (ADAS). This outlook is also supported by the potential benefits arising from Volkswagen (ETR:VOWG_p)'s contributions to the company.
Despite the upgrade, Citi refrained from assigning a 'Buy' rating. This cautious stance is attributed to several challenges, including tough BEV demand and supply dynamics, recent weak electric vehicle (EV) sales, and a weak model cycle that is expected to persist until the fourth quarter of 2024. These factors are seen as potential headwinds for XPeng in the short to medium term.
In other recent news, Citi has upgraded XPeng's rating to neutral and increased its price target to $8.30, citing expectations of a stronger model cycle for the electric vehicle manufacturer. This follows the company's Q1 revenue report, which showed a significant year-over-year 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%.
XPeng is also preparing for the launch of its first low-end "Mona" branded car, which could potentially enhance its market presence. This development comes as China's National Development and Reform Commission predicts a continued surge in the country's new energy vehicles demand, which aligns with China's broader environmental goals and ambition to lead the global auto industry.
Meanwhile, 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. 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, part of a broader initiative to expedite the integration of highly autonomous vehicles into the market.
InvestingPro Insights
Following the recent upgrade by Citi, XPeng Inc. (NYSE: XPEV) continues to be a focal point for investors seeking opportunities in the electric vehicle sector. According to InvestingPro data, XPeng boasts a market capitalization of $7.48 billion USD. Despite facing challenges, the company has shown impressive revenue growth over the last twelve months as of Q1 2024, with an increase of 41.64%. This growth is underscored by a particularly strong quarterly revenue growth of 62.35% in Q1 2024, demonstrating XPeng's ability to expand its market presence.
InvestingPro Tips indicate that XPeng holds more cash than debt, which could provide financial flexibility in the dynamic EV market. Additionally, the fact that 3 analysts have revised their earnings upwards for the upcoming period suggests a positive sentiment towards the company's future performance. On the flip side, the company's weak gross profit margins and the anticipation of non-profitability for the year are factors for investors to consider. Notably, XPeng is seen as a prominent player in the Automobiles industry, yet the stock price has experienced significant volatility, having taken a big hit over the last six months.
For investors looking to delve deeper into XPeng's financials and future prospects, there are additional InvestingPro Tips available at Investing.com/pro/XPEV. Moreover, users can take advantage of an exclusive offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a wealth of investment insights and analysis.
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