XPeng (NYSE:XPEV) investors might feel like they’re driving in the fast lane after the company released its August delivery data. It’s fine to celebrate the small victories, but there are bigger-picture concerns that don’t bode well for XPeng stock. All in all, I am neutral on XPeng stock.
XPeng is a China-based electric vehicle (EV) manufacturer. Sure, the global EV industry has growth potential over the coming years, especially in China, where the government generally favors clean energy initiatives. With this in mind, it might be tempting to jump headfirst into the trade with XPeng stock.
After we examine XPeng’s recent monthly vehicle delivery report, you may be even more emboldened to buy the stock. However, there’s more to the story with XPeng than one good month of EV deliveries. Not long ago, the automaker issued forward vehicle delivery guidance that fell far short of the experts’ consensus forecast.
That’s troubling, and it might set eager XPeng stock traders up for a major disappointment. As we delve deeper into the challenges that XPeng will continue to face throughout 2022, any optimism could and should shift to a cautious stance.
XPeng Showed Impressive EV Delivery Growth in August
Don’t get the wrong idea. There’s no need to be full-on bearish about XPeng stock, and short-selling the shares would be a dangerous proposition. That’s because XPeng’s August EV delivery figures demonstrated an impressive rate of growth.
So, here’s the scoop. In the month of August, XPeng delivered 9,578 smart EVs, and this result represents a 33% year-over-year increase. This total includes 5,745 P7 smart sports sedans, 2,678 P5 smart family sedans, and 1,155 G3i and G3 smart compact SUVs.
Along with those figures, XPeng disclosed that it had delivered a total of 90,085 smart EVs during 2022’s first eight months, indicating a 96% year-over-year increase. With that vehicle delivery growth rate, XPeng and the company’s bullish investors definitely earned some bragging rights.
Overall, however, XPeng stock traders didn’t seem too impressed with these monthly delivery results. Interestingly enough, XPeng shares declined 2.2% after the results were released. What’s going on here?
To make sense of this, we have to put XPeng’s 9,578 August smart-EV deliveries into perspective. Specifically, this result marks a 16% month-over-month decline compared to XPeng’s 11,524 July deliveries. This isn’t mentioned in XPeng’s press release, and it’s an example of why investors must always dig deeper into the data before forming a bullish or bearish conclusion.
XPeng’s Quarterly Profit Missed Analysts’ Expectations
In order to get the full picture of XPeng’s progress as a business, you’ll need to look back further than the company’s August delivery numbers. After delving into the company’s second-quarter 2022 results, some of which fell short of analysts’ expectations, you’ll probably decide that it’s not a good time to buy XPeng stock.
Let’s start with the top-line results. During Q2 2022, XPeng generated the equivalent of $1.11 billion in revenue (all figures are roughly converted from RMB to USD). XPeng stated that this number is “comparable to the level of the first quarter of 2022,” so there’s no major quarter-over-quarter growth to report here. Moreover, XPeng’s second-quarter revenue came in roughly in line with Wall Street’s expectations.
There’s nothing terrible here so far, but also nothing to get excited about. It gets more interesting, albeit not in a positive way when we observe the company’s bottom-line results. In Q2 2022, XPeng recorded an adjusted earnings loss of $367.9 million. Hence, despite generating over $1 billion in quarterly revenue, XPeng didn’t manage to turn a quarterly profit. Making matters worse, XPeng’s Q2 net loss was worse than the $288 million loss that analysts had expected.
XPeng Honorary Vice Chairman and President Hongdi Brian Gu proudly declared, “Our solid financial results for the second quarter of 2022 reflect our ability to meet strong market demand despite supply chain challenges and cost inflation.” Should a $367.9 million adjusted net loss be considered a “solid” result, though? Some investors would consider bottom-line results to be more important than top-line results, so Gu’s braggadocio might not be fully justified by the hard data.
XPeng’s EV Delivery Guidance for Q3 is Underwhelming
Looking ahead to 2022’s third quarter, XPeng expects to deliver between 29,000 and 31,000 vehicles. That might sound like an impressive range, but as always, digging deeper into the data will reveal the bigger picture. Unfortunately, XPeng’s forecast is actually underwhelming when we put it into context.
Notably, XPeng delivered 34,422 vehicles during the second quarter. Therefore, XPeng’s expected range for Q3 falls below the actual EV delivery result from the second quarter.
Additionally, analysts on Wall Street had estimated that XPeng would deliver around 45,000 EVs during Q3. So, XPeng’s lowball range is alarming, as it suggests that the company envisions a potential slowdown in vehicle deliveries, which would undoubtedly impact XPeng’s top and bottom lines.
Is XPEV a Good Stock to Buy?
Turning to Wall Street, XPEV has a Moderate Buy consensus rating based on six Buys and three Holds assigned in the past three months. The average XPeng stock price target is $47.40, implying 197.2% upside potential.
Conclusion: Should You Consider XPeng Stock?
The takeaway here is that XPeng isn’t very confident about its Q3 sales prospects, so investors should remain cautious for now. Consequently, it’s wise to take a neutral stance on XPeng stock and refrain from buying the shares until more data comes in.
