On Tuesday, Goldman Sachs initiated coverage on ZEEKR Intelligent Technology (NYSE:ZK), issuing a Buy rating with a price target of $34.00. The new coverage comes with a positive outlook on the company's growth trajectory despite its late entry into the New Energy Vehicle (NEV) market.
ZEEKR, which debuted in the NEV market in 2021, has been noted for its fewer models compared to competitors such as XPeng (NYSE:XPEV) and Nio (NYSE:NIO), which offer six to eight models and entered the market around 2018/2019. Nevertheless, Goldman Sachs forecasts ZEEKR's 2024 production volume to reach 215,000 units, surpassing that of Nio and XPeng. The forecast is based on an estimated compound annual growth rate (CAGR) of 56% from 2023 to 2026.
The analyst pointed out the driving factors behind this growth expectation, including the successful relaunch of the ZEEKR 001 model, the commencement of ZEEKR 007 deliveries, and the anticipation of new model releases, with two launches projected every year from 2024.
Despite these positive indicators, ZEEKR's stock is trading at a lower price-to-sales ratio (P/S) than its China NEV peers. The stock trades at 0.6x for 2024 and 0.4x for 2025, relative to the average of 1.2x and 0.9x for its peers.
Goldman Sachs' price target of $34.00 is based on a 0.7x P/S ratio, which aligns with the average of China NEV peers, calculated on ZEEKR's expected 2025 vehicle sales. This target suggests a 35% upside potential from the current stock price. The firm's optimistic stance on ZEEKR reflects confidence in its ability to outperform within the competitive NEV sector.
InvestingPro Insights
Goldman Sachs' bullish outlook on ZEEKR Intelligent Technology (NYSE:ZK) is mirrored by some interesting financial metrics. With a market capitalization of $6.34 billion, the company shows significant size in the industry. However, ZEEKR's financials reveal that it is not yet profitable, with a negative P/E ratio of -5.5 over the last twelve months as of Q4 2023. This is consistent with the company's status as a newer entrant in the rapidly evolving New Energy Vehicle market.
InvestingPro Tips highlight ZEEKR's high shareholder yield and its position as a prominent player in the Automobiles industry, which could be contributing factors to Goldman Sachs' positive outlook. On the flip side, the company's weak gross profit margins, at 13.26%, and the fact that short-term obligations exceed its liquid assets, signal potential financial challenges ahead.
The company has experienced impressive revenue growth, with a 61.99% increase in the last twelve months as of Q4 2023. This growth trajectory aligns with Goldman Sachs' projection of ZEEKR's rapid production volume expansion and may justify the firm's expectation of the company outperforming its peers.
For readers interested in gaining deeper insights into ZEEKR's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/ZK. These tips can provide valuable guidance for potential investors looking to make informed decisions. And don't forget, by using the coupon code PRONEWS24, you can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more detailed analysis and tips to help navigate your investment journey.
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