XPeng (XPEV) stock is surging, having risen more than 50% over the past month. That uplift can be attributed to a few factors, including improved deliveries in September as well as Chinese government stimulus that has lifted stocks in the world’s 2nd-most populated country. However, I’m wary about XPEV stock’s valuation, with the share price now trading above the consensus Wall Street price target. The company is also trading at a premium to its peers. Despite positive business indicators, I hold a neutral view of XPEV.
A Closer Look at XPeng
XPeng is a Chinese electric vehicle (EV) manufacturing company founded in 2014. The company has rapidly gained prominence in the EV market and the stock achieved notoriety during the pandemic along with its peers, as cash flooded into the sector.
Investor excitement declined after the pandemic, and although there are signs of a resurgence, I have a Hold rating. XPEV stock is volatile, as evidenced by its 24-month Beta of 1.83, which is higher than peers like Nio (NIO) at 1.34. After a strong IPO in 2020, the stock faced challenges in 2022 and early 2023. However, it has shown signs of life in 2024, with a 70%+ surge in the past three months.
XPeng offers a range of smart electric vehicles, including SUVs and saloon cars, with impressive claimed range capabilities. The G6 SUV, for example, boasts ranges of up to 550 kilometers on a single charge, putting it on par with industry leaders like Tesla (TSLA). Moreover, it can be charged from 10% to 80% in just 18-20 minutes, less time than for many competitors.
Why Is XPeng Stock Surging?
There are several reasons for XPeng’s recent stock surge. The Chinese government recently implemented an economic stimulus program whose primary aim is to support China’s struggling property market. The program also seeks to provide financial aid to residents while expanding social security benefits for unemployed graduates. The news sent Chinese stocks soaring. At the time of writing, the Hang Seng is up more than 25% during the past month month.
The company’s vehicle deliveries for September were impressive, with XPeng setting a new monthly record of 21,352 units, a 39% year-over-year increase. This increase was driven by the successful launch of new models, particularly the XPeng MONA M03, which exceeded 10,000 deliveries in its first month. Peers, including Li Auto (LI), also fared well in September, providing further support for stocks in the sector.
We’ve also seen analysts turn more bullish on the stock. JPMorgan (JPM) recently upgraded the stock to Overweight, projecting a significant increase in quarterly deliveries and forecasting sales volume to reach 300,000 units by 2025.
XPeng Has Been Underperforming
Despite these positive forecasts, XPeng has been underperforming compared to its peers in recent months and years. So far this year, XPeng has delivered 98,561 vehicles, up 21% year-on-year. Third-quarter deliveries came in at 46,533, up 16.3% year-on-year. By comparison, Li Auto reported 152,831 deliveries in the third quarter, an increase of 45.4% year-on-year. However, XPeng isn’t trailing the pack. Nio’s deliveries for the quarter were up just 11.6% year-on-year, albeit from a higher starting point at 61,855.
While past performance is not indicative of future performance, it’s certainly something to bear in mind. Many investors would agree that XPeng hasn’t fulfilled its promise yet.
Is XPeng Stock Cheap?
XPeng isn’t profit-making, and despite JPMorgan’s suggestion that the company will deliver as many as 300,000 units in 2025, I see no clear path to profitability. In fact, analysts covering the stock predict continued but improving losses through 2026.
XPEV stock is currently trading at about 2.1x forward sales, putting it at nearly a 150% premium to the consumer discretionary sector as a whole. This also puts the stock at a premium to peer companies in terms of forward P/S, with Rivian (RIVN), Nio (NIO), and Li Auto (LI) trading at 2.03x, 1.52x, 1.54x respectively. Tesla (TSLA), which trades at a forward P/S of 8.62x, is an exceptional outlier here.
Is XPeng Stock a Buy, According to Analysts?
On TipRanks, XPEV comes in as a Moderate Buy based on seven Buys, two Holds, and one Sell rating, as assigned by Wall Street analysts in the past three months. The average XPEV stock price target is $11.55, which is more than 10% below the recent trading price.
The Bottom Line on XPeng
XPeng has underperformed its peers in recent years, but the stock has surged on the back of some fairly limited data at this moment in time. With profitability not expected in the medium term, it’s hard to get excited about XPeng. Moreover, the stock is trading at a premium to most peers, indicating that it might be overbought.
Nonetheless, investors will be buoyed by the performance of the MONA M03, with the vehicle accounting for almost half of the cars delivered in September. It’s certainly a trend worth keeping an eye on.
