Xpeng Is Lagging Its Peers. What’s Next For The Stock?

Chinese luxury electric vehicle maker Xpeng stock published its delivery numbers for August, indicating that it sold a total of 13,690 vehicles. While this marks a 43% increase year-over-year and a 24% increase over the prior month, the company’s growth and numbers still lag behind rivals such as Li Auto and Nio. For example, Li Auto stock delivered 34,914 vehicles for the month (a 7x increase over the last year), while Nio sold about 19,329 (81% year-over-year increase).

Interestingly, XPEV has had a Sharpe Ratio of 0.4 since early 2017, lower than 0.6 for the S&P 500 Index over the same period. This also falls short of the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

While uptake for Xpeng’s vehicles was sluggish earlier this year, amid mounting competition from EV bellwether Tesla
TSLA
and Li Auto, as well as slower-than-expected Chinese economic growth following the Covid-19 reopening, Xpeng has benefited from the release and production ramp of the G6 Ultra Smart Coupe – the company’s fifth model. The company said that it sold 7,068 units of the vehicle for the month of August. However, this implies that the sales of all the other models in the company’s lineup combined actually declined by roughly 30% versus last year. Moreover, Xpeng’s cumulative sales for the first eight months of the year also remain down versus last year.

So, is Xpeng stock a buy at current levels of about $17 per share? Competition in the market is expected to remain stiff, and this could reduce Xpeng’s pricing power. Xpeng’s financial performance has also been tough. For Q2, the company posted its widest-ever net loss since going public, while its vehicle gross margins came in at negative 8.6%, down from 9% in the year-ago period. Xpeng also trades at close to 4x forward revenues, which is ahead of Nio and Li Auto, which are both seeing faster revenue growth. Considering this, we think the stock could face pressure in the near term. See our analysis of Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for a detailed look at how Xpeng stock compares with its rivals Li Auto and Nio.

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