A $57 Price Target Could Be Just the Beginning for Xpeng
Let’s be honest. Not every investor loves Chinese companies and stocks right now. Perhaps some investors saw what happened to ride-hailing giant Didi Global (NYSE:DIDI). As a result, maybe they’re afraid to take a position in China-based electric vehicle (EV) maker Xpeng (NYSE:XPEV) because XPEV stock might also tank.
Yet let’s not make generalizations. Granted, the Chinese government has been cracking down on some companies, mainly due to cybersecurity and antitrust concerns.
But not every China-based company is in trouble. Moreover, XPEV stock won’t necessarily meet the same fate as Didi and other Chinese stocks.
Indeed, recently issued statistics indicate that Xpeng is firing on all cylinders. Besides, one prominent analyst is bracing for its shares to climb, and his bullish argument is convincing.
A Closer Look at XPEV Stock
The shares did have their time in the sun, back in November 2020. At that time, the share price rocketed from $20 to a peak of $74.49.
Unfortunately, folks who chased the stock in the mid-$70’s were soon punished for their haste. As it turned out, a nasty crash ensued in late 2020 and persisted throughout the first few months of 2021.
Since the summer, XPEV stock has been rangebound and can’t seem to break above $45. There’s an old saying, though: the longer the base, the higher in space. In other words, prolonged sideways periods can sometimes be the launch pad for a major breakout.
So don’t be discouraged by the lateral movement of XPEV stock. A big move could be just around the corner – and it would be a shame if you don’t have a position in the stock when it happens.
No One Can Argue With These Results
Stocks will always have their doubters and naysayers, especially when it comes to Chinese companies nowadays. However, the skeptics would be hard-pressed to argue with the numbers included in Xpeng’s recently published vehicle delivery update.
Seriously, the company just killed it across the board. For one thing, Xpeng posted 10,412 deliveries in September, marking the company’s highest-ever monthly delivery figure.
Along with passing the 10,000 milestone, that number also represents a 199% year-over-year surge and a 44% increase over the previous month.
Do you need more ammo that supports the bull thesis? Here you go: for Q3, Xpeng achieved a quarterly record of 25,666 deliveries. That amounted to a 48% increase versus Q2, as well as a 199% YOY improvement.
But wait; it gets even better when we extend the timeline. In the first nine months of the year, Xpeng delivered a total of 56,404 vehicles, which represents a whopping YOY increase of 300%.
Bear in mind, this occurred during a semiconductor shortage, as well as the Chinese government’s crackdown on multiple industries.
Yu Said It
Even with those delivery stats in mind, some folks will still be nervous about Xpeng because Chinese stocks have taken a beating this year. To help assuage their fears, I’ll refer the skeptics to Deutsche Bank’s Edison Yu.
While acknowledging that there have been several reasons for the underperformance of Chinese stocks, Yu asserts that the “largest overhang” has been investors’ reluctance to commit to the nation’s equities following the Chinese authorities’ crackdown on Didi.
I tend to concur with Yu’s reasoning. Looking ahead, Yu believes that “sentiment {towards Chinese EV stocks) could be bottoming going into year-end.” That, of course, should be beneficial to Xpeng and its shareholders.
Furthermore, for Q4, Yu believes that Xpeng’s delivery guidance in the 35,000 to 40,000 range, and he predicts that the company will deliver 15,000 vehicles in December.
Those estimates are realistic, and would bring Xpeng’s full-year volume to almost 94,000 deliveries, representing a 247% YOY increase. Yu raised his price target on XPEV stock from $51 to an even more ambitious $57.
The Bottom Line
I like the sound of $57, but long-term investors can aim even higher than that if they truly believe in the company. And why wouldn’t they? Just look at those delivery numbers and the surges in the automaker’s deliveries.
They’re outstanding and suggest that XPEV stock deserves to be much higher.
So if you own the stock, just be patient and be prepared for a spectacular ending to Xpeng’s record-breaking year.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
