Chinese electric vehicle (EV) manufacturer XPeng Inc. (XPEV) is scheduled to release its fourth-quarter and full-year 2021 results on Monday, March 7, 2022. Management guided for above 150% year-over-year revenue growth, but analyst estimates are a bit conservative. Upcoming earnings could determine whether a Strong Buy recommendation will stick on XPEV stock.
XPeng is an electric vehicle manufacturer currently known for its XPeng G3 SUV and a four-door XPeng P7 sport sedan model. The company launched the P5 smart family in September 2021, and in November, it unveiled its new flagship smart SUV, the G9, which it expects to make initial deliveries of during the third quarter of 2022.
Due to the risks noted below, I’m currently neutral on the Chinese EV maker’s shares.
What to Expect in XPeng’s Upcoming Earnings
In November 2021, the company provided fourth-quarter revenue guidance, expecting RMB7.1 billion ($1.12 billion) to RMB7.5 billion ($1.19 billion), representing an increase between 149% and 163% year-over-year. Management expects deliveries of vehicles to be between 34,500 and 36,500, which will lift revenue growth for the quarter.
Wall Street analysts forecast XPeng’s fourth-quarter revenue of $1.09 billion, representing 143% growth year-over-year. The top-line estimate appears conservative and marginally discounts insiders’ guidance.
Analysts’ consensus earnings per share (EPS) estimate for the fourth quarter of 2021 is a loss of $0.36 per diluted share. If achieved, this would be an improvement from the previous year’s $0.48 loss per share.
The company missed analysts’ EPS estimates in a most recent financial report but had beaten earnings estimates in three consecutive quarters before then.
Key Q4 Revenue Growth Drivers for XPeng to Watch
XPeng’s production growth is being accompanied by strategic rollouts of distribution centers. At the end of September last year, the company had a physical sales network of 271 stores, covering 95 cities.
The company’s branded supercharging stations rapidly expanded from 439, covering 121 cities in September 2021, to 813 branded supercharging stations across 333 Chinese cities and four municipalities by mid-January 2022.
The company has gained wide market acceptance for its electric cars, evidenced by ever-increasing quarterly vehicle deliveries.
Total vehicle deliveries reached 41,751 for the fourth quarter, a strong 222% year-over-year increase. The company beat the upper end of its delivery guidance for the quarter of 36,500 by over 14%. Total deliveries for the year 2021 were 98,155, a year-over-year increase of 263%. Cumulative deliveries reached 137,953 as of the end of December 2021.
Although vehicle sales account for the majority (about 95%) of XPEV revenue, charging is another growth area to watch. The company has a growing number of supercharging stations and home charging piles.
Recent Developments Affecting XPEV Stock
Xpeng’s monthly vehicle deliveries for January of 12,922 showed a significant decline from 16,000 in December. Although cumulative deliveries exceeded 150,000 by January 31, 2022, the recent deceleration could be a cause for concern for XPEV stock investors going forward.
That said, a February inclusion of XPeng stock in the Shenzhen-Hong Kong Stock Connect Program increased access to XPEV stock to Chinese investors in a move that expanded the investor base, improved liquidity in the company’s shares, and enhanced price discovery for Xpeng equity.
XPEV stock will also be added to The Hang Seng TECH Index on March 7. The Hang Seng Family of Indexes is widely regarded as the most important gauge of the Hong Kong stock market. The index inclusion could increase institutional demand for Xpeng’s shares and dampen price volatility for the EV stock.
Increased active investor participation and a listing in China are critical for XPEV stock, given the uncertainty surrounding Chinese companies listed in the United States.
Wall Street’s Take
XPeng stock has a consensus Strong Buy rating from Wall Street analysts based on four Buys and one Hold rating. The average XPeng stock price target of $47.26 represents 39.5% upside potential over the next 12 months.
Investor Takeaway
Business fundamentals continue to improve at Xpeng, and the upcoming earnings installment could provide some additional catalyst to XPEV stock price if results exceed expectations. A bullish earnings guidance from management could lift shares too.
That said, XPeng faces the same delisting risk as other Chinese companies listed in the U.S. An auditing-related impasse and geopolitical tensions remain significant factors to consider before buying any affected names in a long-term focused portfolio at the moment.
Until these matters get resolved, affected Chinese stocks may remain subdued for longer as the risk of being delisted from deeply liquid American exchanges linger.
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