The environmental importance of the electric vehicle (EV) revolution really needs no introduction. This is the future of the auto industry, and investors in companies like automaker Xpeng (XPEV) are factoring in some pretty hefty growth.
However, with how bearish the market has been of late on hyper-growth stocks, is now the time to own a company like Xpeng? Will this stock’s growth completely overshadow any near-term concerns?
That’s a difficult call. Personally, I’m generally bullish on XPEV stock from a long-term perspective. Sure, there may be more short-term pain with this stock. However, for investors looking for a great long-term holding, there’s a lot to like about this company.
Let’s dive into a few interesting things investors should keep on their radar with Xpeng.
Highly Intriguing Business Model of Xpeng
Compared to U.S.- or European-based EV companies, Xpeng certainly is a stock worth watching. That’s mostly because this company is based in China.
The target market of Xpeng is centered on the Chinese middle-class. The goal of this organization is to grab a market share of this specific group of individuals. These include those who can’t afford or aren’t interested in stretching their budget to purchase a Tesla (TSLA) or a Nio (NIO) automobile can choose Xpeng. It turns out that this section of the population is a rapidly growing one.
The Chinese middle class has witnessed an astonishing rise and a boom in consumer expenditure. Xpeng thus looks to be well positioned for taking advantage of the enhanced demand over the medium term. In fact, its positioning appears to be superior compared to its peers at the moment.
Moreover, millennial buyers are getting highly inclined to the brand’s lidar-equipped smart EVs. These vehicles are technologically advanced, and, along with the combination of a superb online sales presence, they have caught the attention of investors. The company is playing its role regarding the transformation of the EV purchase experience in small, incremental ways.
These small innovations can lead to it paying substantial dividends to investors in the long run.
Targeting Expansion in Manufacturing
Xpeng signed an agreement mid-last year to construct Phase Two of the company’s EV expansion project. This agreement was signed with Zhaoqing High Technology Industry Development Zone and Zhaoqing Municipal Government.
The agreement is aimed at giving a boost to Xpeng’s annual electric vehicle production capacity. With the local government’s support, this agreement will increase the production capacity to 200,000 units a year from 100,000 units. By all accounts, Xpeng is meeting these growth expectations and is likely to continue to expand capacity over time.
Investors are impressed with Xpeng’s outstanding year-over-year growth and excellent delivery figures. The company’s recent results highlight surging Chinese demand for EVs, which is something not necessarily seen in North America. Accordingly, Xpeng is a company worth considering in terms of scalability over the long term.
Venturing into International Markets
With the first shipment of P7 electric vehicles, the brand has officially marked its presence in Norway. Xpeng made its first move in Europe in 2020 with the G3 SUV. It looks forward to expanding further into Europe in the future.
Norway turns out to be a hot market for electric vehicles. The move to start international expansion from this nation appears to be the right move for this company. With this, Xpeng will be having its second EV model available outside of China. The expansion into the international market is vital for EV makers to produce greater revenue.
Wall Street’s Take
Turning to Wall Street, Xpeng is a Strong Buy. Out of three analyst ratings, there are three Buy recommendations.
The average Xpeng price target of $63.79 implies 72.1% upside potential. Analyst price targets range from a high of $92 per share to a low of $28.38 per share.
The Bottom Line
Xpeng’s growth potential provides a considerable safety margin for long-term growth investors. However, individuals must note that this stock isn’t without risk. Accordingly, taking caution, particularly right now as interest rates rise and investors de-risk their portfolios, seems prudent.
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