Citi has updated its outlook on XPeng Inc. (NYSE: NYSE:XPEV), raising the electric vehicle manufacturer's price target to $10.30 from the previous $8.90 while maintaining a Neutral rating on the stock.
The adjustment reflects the firm's anticipation of increased sales volumes and improved financial forecasts for the coming years.
Citi's revised price target is based on several positive developments for XPeng, including the robust order intake for the MONA M03, the expected launch of the P7+ model in the fourth quarter of 2024, and a potential pipeline of Extended Range Electric Vehicle (EREV) models slated for 2025. The firm has increased its sales forecast for XPeng for the years 2024 to 2026 by 7-8%, now expecting sales of 207,000, 322,000, and 405,000 units, respectively.
The improved sales outlook also leads to a more favorable net loss forecast for the same period. Citi now projects XPeng's net losses to be lower by 4-11%, estimating losses of RMB 6.1 billion, RMB 4.8 billion, and RMB 3.4 billion for the years 2024, 2025, and 2026, respectively.
The valuation adjustment to a $10.30 price target from $8.90 is also influenced by Citi's application of a higher price-to-sales (P/S) ratio for XPeng. The ratio has been increased to 1.6 times from 1.5 times based on the 2024 estimated sales, reflecting a one-year average.
In other recent news, JPMorgan has upgraded XPeng's stock from neutral to overweight, anticipating a significant increase in vehicle deliveries due to the launch of new models later this year.
The firm projects XPeng's sales volume to rise to around 300,000 units in 2025, marking a 72% year-over-year growth. Meanwhile, Volkswagen (ETR:VOWG_p)'s CEO Oliver Blume is facing challenges with Germany's IG Metall union over potential plant closures and a possible partnership with XPeng.
China's Didi Global is nearing the final stages of discussions to divest its smart driving and cockpit assets to a subsidiary of NavInfo, AutoAi, for approximately $70 million. This move aligns with Didi's strategy to focus on its core ride-hailing business.
In other recent developments, JPMorgan and BofA Securities have adjusted their price targets for XPeng following the company's second-quarter results, which showed a 60% year-over-year revenue growth and a gross margin improvement of 14%. Despite these positive indicators, XPeng posted a net loss of 1.29 billion yuan.
InvestingPro Insights
Following Citi's updated outlook on XPeng Inc. (NYSE:XPEV), real-time data from InvestingPro provides additional context to the electric vehicle manufacturer's financial health and stock performance. With a market capitalization of $10.01 billion, XPeng is positioned as a significant player in the Automobiles industry. The company's revenue growth is impressive, with a surge of 72.08% over the last twelve months as of Q2 2024, and a quarterly revenue growth of 60.22% in Q2 2024.
InvestingPro Tips highlight that XPeng holds more cash than debt on its balance sheet, a positive sign for financial stability. However, the company has not been profitable over the last twelve months, and analysts do not anticipate it will be profitable this year. Despite these challenges, XPeng has demonstrated strong returns, with a 36.38% increase in stock price over the last month and a 20.71% increase over the last three months as of the date provided.
Investors may also note the company's high price volatility, which could be a consideration for those with a lower risk tolerance. For more detailed analysis and additional InvestingPro Tips, users can visit InvestingPro for XPeng at https://www.investing.com/pro/XPEV, where 11 more tips are available to help inform investment decisions.
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