On Tuesday, Morgan Stanley (NYSE:MS) updated its outlook on Xiaomi (OTC:XIACF) Corp (1810:HK) (OTC: XIACF) stock, increasing the price target to HK$26.00 from the previous HK$25.50, while reaffirming an Overweight rating.
The adjustment follows a robust first-half performance in 2024, prompting the firm to revise revenue forecasts and gross margin assumptions for the upcoming years.
Morgan Stanley's analysis led to an upward revision of Xiaomi's revenue forecasts by 3% for 2024 and 2% for 2025. Additionally, the firm adjusted its gross margin expectations, increasing them by 0.7 percentage points for 2024 and 1.1 percentage points for 2025. These revisions have resulted in a significant lift in earnings estimates for the company—18% for 2024 and 13% for 2025.
The positive financial adjustments have been reflected in the new Residual Income (RI)-derived price target of HK$26.00. Morgan Stanley's commentary indicated confidence in Xiaomi's potential as a disruptive force in the electric vehicle (EV) industry. The firm anticipates more positive developments for Xiaomi in the next 12 months.
In addition to the EV sector, Xiaomi's traditional businesses, including smartphones, AIoT (Artificial Intelligence of Things), and internet services, are also expected to contribute to the company's growth. These sectors are seen as well-positioned to deliver decent growth and could potentially act as another catalyst for re-rating the company's stock value in the future.
In other recent news, Xiaomi Group announced robust growth in its 2024 interim results, with a year-over-year (YoY) revenue increase of 32%, amounting to RMB88.9 billion in Q2. This growth was driven by strong performances in its core businesses of mobile phones and AIoT, as well as its emerging smart EV sector.
Xiaomi's Vice President, Lu Weibing, revealed the company's plans to open 3,000 retail stores globally this year and a commitment to premiumization and smart factory development for certain product categories.
The company's core business revenue from mobile phones and AIoT marked a 23% YoY increase, reaching RMB82.5 billion. Xiaomi also reported a healthy gross profit margin of 20.7%, with the smartphone segment at 12.1%.
The adjusted net profit rose to RMB6.2 billion, a 20% YoY growth. The company delivered over 27,000 units of the Xiaomi SU7 in Q2, with a revised full-year target of over 120,000 vehicles.
These recent developments demonstrate Xiaomi's strategic focus on technology, supply chain management, service improvement, and sustainable economic development.
Despite facing competition from Apple (NASDAQ:AAPL)'s new AI phone, Xiaomi's smartphone business holds a global market share of 14.6%, and its IoT business revenue reached a record high of RMB26.8 billion, growing over 20% YoY.
InvestingPro Insights
Following Morgan Stanley's optimistic outlook on Xiaomi Corp, InvestingPro data also presents compelling metrics that may interest investors. Xiaomi holds a market capitalization of $60.96 billion, with a P/E ratio of 23.06, which reflects investor confidence in the company's profitability. The firm's revenue has shown impressive growth over the last twelve months leading up to Q2 2024, with an increase of 17.16%, and an even more remarkable quarterly revenue growth of 31.97% in Q2 2024. These figures underscore the company's strong financial performance and its potential for sustained growth.
InvestingPro Tips further enrich the narrative of Xiaomi's financial health and investment potential. The company holds more cash than debt, providing it with financial stability (InvestingPro Tip #0). Additionally, the stock is currently trading at a low P/E ratio relative to its near-term earnings growth, suggesting that it may be undervalued (InvestingPro Tip #3). It's also worth noting that Xiaomi is a prominent player in the Technology Hardware, Storage & Peripherals industry (InvestingPro Tip #4), and analysts have revised their earnings upwards for the upcoming period (InvestingPro Tip #1), indicating a positive outlook on the company's future performance.
For investors seeking more detailed analysis, there are additional InvestingPro Tips available, offering deeper insights into Xiaomi's financial landscape and future prospects. These tips and metrics could provide valuable context for Morgan Stanley's updated assessment and the company's strategic positioning in both its traditional markets and the burgeoning EV industry.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.