Xpeng’s stock (NYSE: XPEV) published its Q1 2022 results on Tuesday, reporting a narrower than expected loss, although guidance for Q2 fell short of estimates. While revenue for the quarter rose by over 150% year-over-year to RMB 7.455 billion ($1.12 billion), it declined on a sequential basis, due to the impact of the Chinese Lunar New Year holiday in February and Covid-19 lockdowns in China. Xpeng’s gross margins also improved slightly to 12.2%, from 11.2% in the year-ago period, driven by higher economies of scale. However, guidance was lighter than expected, with the company projecting deliveries of between 31,000 and 34,000 units for Q2, marking a decline from the 34,561 units in Q1, although it still represents a growth of over 85% at the mid-point versus last year.
Xpeng stock fell by over 7% in Tuesday trading following the earnings report, with the stock now remaining down by a massive 60% year-to-date, faring worse than rivals Nio (down 56% year-to-date) and Li Auto (down 29% year-to-date). While growth stocks have been out of favor with the markets as investors brace for higher interest rates, there are some specific factors weighing on Xpeng and other Chinese EV players. For one, there are concerns about a slowdown in the Chinese economy. Moreover, there are concerns regarding the potential delisting of Chinese American depositary receipts (ADRs), given the dispute between the U.S. SEC and China relating to the auditing compliance of Chinese companies listed on U.S. exchanges.
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Now despite the plummeting stock price and listing concerns, the outlook for Xpeng’s core business actually appears pretty strong. As we’ve noted before, overall EV demand and favorable regulation in China are a big tailwind for Xpeng. While passenger car sales in China fell by 35.5% year-on-year in April, new energy vehicles, which include electric vehicles, saw volumes rise by 78%, per the China Passenger Car Association. This should partially alleviate concerns that a broader economic slowdown will significantly hit Xpeng’s business. Moreover, consensus estimates for Xpeng’s revenue project a healthy 100% revenue growth this year. The company has also been making deeper inroads into the European market. Xpeng unveiled its flagship P7 sedan in Norway last year, while recently launching its P5 electric sedan, which is seen as a lower-priced rival to Tesla’s Model 3, in markets including Denmark, the Netherlands, Norway, and Sweden. The European expansion appears to be well-timed, considering that EV demand in the E.U. is only poised to rise as the bloc looks to cut its dependence on hydrocarbon imports from Russia.
Check out our analysis on Nio, Xpeng & Li Auto: How Do Chinese EV Stocks Compare? for more details on how Xpeng stock stacks up versus its peers Nio and Li Auto.
|S&P 500 Return||-5%||-17%||76%|
|Trefis Multi-Strategy Portfolio||-8%||-23%||201%|
 Month-to-date and year-to-date as of 5/25/2022
 Cumulative total returns since the end of 2016