Evaluating Xpeng Motors Stock Amidst 2024 Challenges

Xpeng Stock

Chinese electric vehicle (EV) manufacturer Xpeng Motors (NYSE:XPEV) faces a critical juncture in 2024 as investors weigh the potential for a turnaround following a challenging period. Despite a positive finish in the previous year, XPEV’s stock has experienced a significant decline, dropping over 14% since the beginning of 2024 and more than 23% in the last three months.

In 2023, Xpeng Motors made strategic moves, introducing its cost-effective SEPA 2.0 platform and forming a partnership with Volkswagen (VWAGY) to co-develop vehicles for the Chinese market. Additionally, a collaboration with Didi resulted in the creation of the “MONA” project, aiming to produce affordable electric vehicles priced around $20,000.

The launch of the G6 SUV garnered praise, becoming the top-selling vehicle in its category, and Xpeng achieved a milestone with 60,000 deliveries in Q4, along with the introduction of the X9 MPV earlier this month. Despite these positive developments, the stock’s performance does not mirror the company’s achievements, currently trading at less than 1.5 times its projected 2024 revenues.

However, Xpeng Motors’ stock decline is largely attributed to the broader sell-off in Chinese stocks, influenced by economic challenges and regulatory uncertainties. Reports of Alibaba selling its stake in XPEV have further contributed to the negative sentiment surrounding the EV company.

As 2024 unfolds, Xpeng Motors must shift from announcements to execution, focusing on increasing deliveries and improving margins. While the company has shown YoY growth in deliveries, reaching around 20,000 per month, it lags behind competitors like Li Auto, whose monthly deliveries surpassed 50,000 in December.

Xpeng Motors plans to address its negative gross margins, aiming for a “significant increase” in 2024 by cutting costs by 25%. Analysts maintain a “Moderate Buy” consensus rating, with a mean target price of $18.02, representing a 43.8% potential upside. The highest target price of $25.40 suggests the possibility of the stock doubling from current levels.

Despite the challenges posed by the slowing Chinese economy and concerns over the real estate sector, Xpeng Motors presents an attractive risk-reward opportunity at its current valuation. While investing in Chinese stocks carries increased risks, XPEV stands out as a compelling buy, provided it successfully addresses its delivery and margin concerns in the dynamic macroeconomic environment of 2024.

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