Xpeng Motors is today's pick for IBD 50 Stocks To Watch amid impressive growth in sales and deliveries.
Xpeng is a Chinese electric-vehicle manufacturer headquartered in Guangzhou, China. Founded in 2014, Xpeng began production of its first vehicle — the Xpeng G3 SUV — in 2018. The company subsequently produced the P3 Sedan in 2019 and most recently introduced the Xpeng P5 in September. The P5 marked the first production vehicle to use Lidar automated driving assist technology.
Sales And Growth Grow Exponentially
Xpeng Motors' sales and deliveries have grown exponentially. In the company's Q3 report, sales of $887.7 million represented a 187% year-over-year increase. The company also reported more than 25,000 vehicle deliveries — a vast increase from a year prior. Results beat analysts estimates, though Xpeng remained unprofitable after reporting a loss of 27 cents a share.
While unprofitable companies are usually not enticing, the level of sales growth for Xpeng makes the stock look interesting. In the fourth quarter, the company expects to continue to grow rapidly, forecasting deliveries of 34,500 to 36,500 vehicles, with sales set to surpass the billion-dollar mark (an estimated $1.12 billion).
Almost all of Xpeng's vehicle sales have been in China. This is in no way a niche because Chinese auto sales accounted for 30% of the global market in 2020. Xpeng also recently entered Europe, which could offer a large source of future growth, though sales there (for now) remain limited.
Furthermore, competition from new entrants such as Nio and traditional carmakers going electric presents headwinds.
Xpeng Motors' Losses Expected To Narrow
Even with sales largely confined to China, there is clearly a trajectory for Xpeng's future sales growth, though the timeline to profitability remains unclear. On a positive note, the company's losses are expected to continue to shrink. Projected losses of $1.02 a share in 2021 are expected to narrow to 63 cents in 2022.
Analysts surveyed by Bloomberg are bullish on Xpeng's prospects, with 12 buy ratings and only two holds. A consensus price target of $64.07 would represent a 30% upside from current prices.
Xpeng is forming a choppy base with a 56.55 buy point, according to MarketSmith pattern recognition. Investors should take caution buying Xpeng shares due to the high volatility and uncertainty around the company. Yet the growth and past stock performance have been enough to earn a spot in the IBD 50.
