Xpeng Stock Looks Expensive Despite Recovery In Deliveries

XPEV: XPeng logo

Chinese electric vehicle maker Xpeng stock (NYSE:XPEV) has surged by 47% over the past month, outperforming rivals Nio and Li Auto which remain up by about 16% and 20%, respectively.  The recent gains come as deliveries for the second quarter were better than anticipated. Xpeng said that it shipped a total of 23,205 EVs for Q2 2023, marking a 27% increase over the previous quarter. The numbers were also ahead of the company’s guidance of between 21,000 and 22,000 vehicles. The company also delivered about 8,620 cars, marking a 15% increase versus May. However, the quarterly numbers were about 32% lower than deliveries for Q2 2022. That said, the sequential growth indicates that Xpeng may be working its way out of a delivery slump after Tesla and other Chinese EV players began slashing prices on vehicles earlier this year to bolster sales. Separately, Xpeng launched its fifth model, the G6 Ultra Smart Coupe, last month, and there is a possibility that this could also help the company’s numbers to an extent.

So, is Xpeng stock a buy? It isn’t clear. While the company’s deliveries have improved, it has fallen behind rivals such as Li Auto, which delivered 86,533 units over the last quarter. Moreover, competition in the market is also expected to remain stiff. For example, rival Nio just carried out sizable price cuts on its vehicles last quarter. Xpeng’s financial performance has also been tough. For Q1, the company’s net losses were wider than expected, while gross margins came in at a mere 1.7%, down from 12.2% in the year-ago period. Xpeng also trades at about 3x forward revenues, which is ahead of Nio and faster-growing Li Auto. This might not be justified given the margin pressures the company is facing.  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 Nio and Li Auto.

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
YTD [1]
Total [2]
 XPEV Return 13% 52% -65%
 S&P 500 Return 0% 16% 100%
 Trefis Multi-Strategy Portfolio 4% 24% 298%
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[1] Month-to-date and year-to-date as of 7/13/2023
[2] Cumulative total returns since the end of 2016

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