Like other electric vehicle (EV) manufacturers in China and elsewhere, XPeng (
NYSE:XPEV
), is mired in a price war that’s taking a financial toll. As we’ll discover, XPeng’s recent quarterly results aren’t perfect since the company isn’t currently profitable. Nevertheless, I am bullish on XPEV stock and am glad to see it
bouncing off of a low price level.
As a China-based EV maker, XPeng has to deal with competition from local rivals like Li Auto (
NASDAQ:LI
) as well as Tesla (
NASDAQ:TSLA
). Tesla effectively kicked off a price war by reducing the automaker’s vehicle prices, and investors might expect this to weigh on XPeng’s profit margins.
However, a deep dive into XPeng’s quarterly financials will reveal that the company’s margins are actually improving. Plus, XPeng’s forward guidance suggests that the EV price war might not derail the automaker’s progress this year. Along with all of that, XPeng is making a name for itself as a technologically advanced automaker. It’s a surprising story, so let’s delve into the details right now.
XPEV stock has fallen 40.3% year-to-date.
Could XPeng be an AI Pioneer?
Financial traders might not usually think of XPeng as a pioneer in the artificial intelligence (AI) space. Yet, a fresh news story suggests that XPeng is actually on the cutting edge of automotive AI technology.
Here are the need-to-know details. According to a press release,
XPeng recently held an AI-focused event with the specific theme of “Pioneering a new era of smart AI driving.” At that event, the company announced the full rollout of the AI Tianji System XOS 5.1.0 in-car operating system to all eligible XPeng vehicle models.
This, XPeng claims, is the industry’s first in-car operating system to “comprehensively apply AI technology to both smart cockpits and smart driving.” Moreover, XPeng stated that the AI-enhanced automotive operating system improved touch-response speeds by over 30% and increased application-launch speeds by 50%.
What really caught my attention, though, was the announcement of XPeng’s AI Driver Valet automotive feature. This feature generates “customized driving routes after just one learning session.” However, each user can only store up to 10 memory routes, with each route being limited to a maximum length of 100 kilometers. So, there may be room for further progress in this area for XPeng.
Still, the movement in AI-enhanced smart-car experiences has to start somewhere, and XPeng is evidently willing to take a leading role in this revolution. I have a funny feeling that, in the coming months, another automaker like Tesla might take XPeng’s advancements to the next level. However, XPeng deserves credit for pioneering a next-level driving experience that will probably become standard for all new vehicle operating systems at some point.
XPeng Stock Rises from a Very Low Level
The U.S. stock market was mostly flat yesterday, but XPeng stock rose 5.9% due to the market’s positive impression of XPeng’s first-quarter 2024 results. This could be the start of a much bigger rally, as the stock is still nowhere near its 52-week high of $23.62.
As I alluded to earlier, the EV price war undoubtedly has some investors concerned about the margins of automakers like XPeng. On the other hand, you may be surprised to learn that XPeng’s margins are actually on the rise.
In fact, during the first quarter of 2024, XPeng’s gross margin grew to 12.9%, versus just 1.7% in the year-earlier quarter and 6.2% in 2023’s fourth quarter. Furthermore, XPeng’s vehicle margin increased from -2.5% (yes, that’s negative 2.5%) in Q1 2023 and 4.1% in Q4 2023 to 5.5% in the first quarter of 2024.
Now, the market’s positive reaction to XPeng’s quarterly results is starting to make a lot of sense. It looks like the firm is holding up fairly well despite the EV price war. As further evidence of this,
XPeng recorded Q1-2024 revenue of 6.55 billion RMB, or the equivalent of $907 million. This result indicates a year-over-year increase of 62.3%, and it beat the consensus estimate of $859 million in quarterly revenue.
Turning to the bottom-line results, XPeng reported a first-quarter 2024 net loss of the equivalent of $0.20 per share. That might not sound ideal, but it’s better than
Wall Street’s consensus estimate of a loss of $0.34 per share. Also, XPeng did a lot better in Q1 of 2024 than it did in the year-earlier quarter, when it recorded a loss of $0.38 per share.
Is XPeng Stock a Buy, According to Analysts?
On TipRanks, XPEV comes in as a Moderate Buy based on eight Buys, four Holds, and two Sell ratings assigned by analysts in the past three months. The
average XPeng price target is $12.24, implying 39.6% upside potential.
Conclusion: Should You Consider XPeng Stock?
You may not have considered XPeng an automotive AI pioneer. However, its new AI features could set the standard for other automakers to follow.
Additionally, although XPeng isn’t profitable right now, the company’s margins are actually improving despite the ongoing EV price war. Because of this, I’m quite impressed with XPeng’s progress. Therefore, it’s great to see XPEV stock rebounding off of a very low price level, and I would certainly consider taking a small XPeng share position.
Disclosure
Tech stocks were higher Wednesday afternoon, with the Technology Select Sector SPDR Fund (XLK) rising 0.4% and the SPDR S&P Semiconductor ETF (XSD) climbing 2.5%.
The S&P 500 Index ($SPX ) (SPY ) today is down -0.02%, the Dow Jones Industrials Index ($DOWI ) (DIA ) is down -0.01%, and the Nasdaq 100 Index ($IUXX ) (QQQ ) is up +0.11%. US stock indexes today are mixed, with the Nasdaq 100 climbing to a new...
The S&P 500 Index ($SPX ) (SPY ) today is down -0.06%, the Dow Jones Industrials Index ($DOWI ) (DIA ) is down -0.05%, and the Nasdaq 100 Index ($IUXX ) (QQQ ) is up +0.06%. US stock indexes today are mixed. Rising global bond yields are weighing on the...
The EV charging ecosystem in the U.S. is undergoing interesting developments. While Tesla (
NASDAQ:TSLA
) is slowing the expansion of its EV charging network, Airbnb (
NASDAQ:ABNB
) and ChargePoint (
NYSE:CHPT
) are teaming up to provide EV charging solutions for Airbnb guests.
Aiming for Wider EV Charging Access
While Airbnb’s online platform offers travel and accommodation services, ChargePoint is setting up one of the largest EV charging networks in the U.S. Now, the two companies are collaborating to make it easy for ABNB hosts in the U.S. to set up EV chargers at their listings and widen EV charger access in the country.
Under the partnership, CHPT will provide a hassle-free and affordable mechanism for ABNB hosts to purchase and install EV chargers. The effort involves a dedicated website for charging hardware, software, and support services. Furthermore, ABNB guests can use the ChargePoint app to charge their EVs at ABNB listings as well as over 917,000 access points on the ChargePoint network.
Curiously, ABNB listings offering an EV charger see more bookings compared to ones that do not offer the solution. According to Airbnb, searches for listings that offer EV chargers shot up by over 80% last year. Now, that’s some traction for the EV sector. Energy giant BP (
NYSE:BP
) (
GB:BP
) is also eyeing major expansion in the U.S. EV charging space. It plans to
invest nearly a billion dollars in EV charging in the U.S. by 2030.
Is Airbnb a Buy, Sell, or a Hold?
Meanwhile, Airbnb shares have jumped by nearly 31% over the past year. Overall, the Street has a Hold consensus rating on the stock, alongside an
average ABNB price target of $153.52.
Read full
Disclosure
The NASDAQ 100 Pre-Market Indicator is up 15.94 to 18,729.74. The total Pre-Market volume is currently 31,666,762 shares traded.The following are the most active stocks for the pre-market session: PDD Holdings Inc. (PDD) is +8.34 at $153.79, with 5,386,023 shares traded. As repo
Below is Validea's guru fundamental report for TESLA INC (TSLA). Of the 22 guru strategies we follow, TSLA rates highest using our P/B Growth Investor model based on the published strategy of Partha Mohanram. This growth model looks for low book-to-market stocks that exhibit cha
The electric vehicle (EV) industry is dwindling between perils and possibilities. The EV market has experienced a deceleration in its previously rapid growth. Falling sales and a slump in prices have led to this “EV winter.”
Tesla (
NASDAQ:TSLA
) had a slow start to the second quarter in Europe, as the
EV maker clocked sales of 13,951 vehicles in April, a 2.3% drop from last year and the lowest since January 2023. This was a stark contrast from the 14% increase in industry-wide electric vehicle sales, according to the European Automobile Manufacturers’ Association.
EV Sales Growth Hasn’t Reached Full Potential
The increase in electric vehicle sales by 14% highlights a positive trend for the industry. However, this growth could have potentially been higher if not for certain challenges faced by EV manufacturers in Europe. Reduced subsidies in key markets like Germany and Sweden have impacted companies such as Volkswagen (
OTC:VWAGY
) and Mercedes-Benz (
OTC:MBGAF
), prompting adjustments to their product plans. Despite these hurdles, Volkswagen is gearing up for more plug-in hybrids, Mercedes-Benz is intending to continue producing combustion cars into the 2030s.
Overall, EV registrations remained stagnant in Germany, Europe’s largest EV market, and Tesla’s sales dropped by 32% in April in that country, lagging behind its peers. Nevertheless, the growing electric vehicle sales still signal that the demand for EV vehicles is not going to be subdued any time soon.
Tesla Is Also Struggling in China
For Tesla, Europe is the second market where it is struggling, following China. In April, the company sold 62,167 EVs manufactured in China, an 18% decline year-over-year, according to data from the China Passenger Car Association (CPCA).
This decline occurred despite new energy vehicle sales in China increasing by 33% year-over-year to 800,000 units in April. China defines new energy vehicles as those including battery-powered EVs and plug-in hybrids.
Is Tesla a Buy, Sell or Hold?
Analysts remain sidelined about TSLA stock, with a Hold consensus rating based on nine Buys, 15 Holds, and nine Sells. Year-to-date, TSLA has
declined by more than 20%, and the
average TSLA price target of $174.60 implies a downside potential of 6.4% from current levels.
June S&P 500 E-Mini futures (ESM24) are trending down -0.11% this morning as market participants awaited minutes of the Federal Reserve’s latest policy meeting as well as an earnings report from artificial intelligence bellwether Nvidia.
On Monday, Tesla, Inc. TSLA provided a major update on its electric semitrucks project. The project, since its announcement in 2017, has experienced a series of delays. The EV behemoth confirmed that its flagship model, Tesla Semi
I’m bearish on Tesla (
NASDAQ:TSLA
), and I can’t help but think that Elon Musk’s announcement regarding the
unveiling of a Robotaxi on August 8 is something of a distraction. So, why would Musk be distracting us? Well, vehicle sales are slowing, margins are falling, and Tesla’s dominance in the electric vehicle (EV) segment is over. Plus, the stock’s valuation is high. This is why I’m bearish on TSLA stock, but I don’t expect it to move much until we know what Musk has in store for us on August 8.
TSLA stock has fallen by 13.5% in the past three years.
Tesla’s Performance Is Underwhelming
In Q1, Tesla reported a 9% decline in quarterly revenue — the steepest year-over-year decline since 2012 — and a 48% decrease in adjusted profit. The company’s adjusted earnings per share (EPS) came in at
45 cents versus the expected 49 cents. Also, revenue for the quarter fell to $21.3 billion — less than the $22.2 billion the market had anticipated.
Revenue fell both on a year-over-year basis and sequentially. Meanwhile, net income dropped 55% to $1.13 billion from $2.51 billion a year ago. On a non-adjusted basis, net income per share fell from 73 cents a year ago to 34 cents in Q1 2024. Moreover, in an increasingly competitive market, Tesla’s price cuts negatively impacted margins with no obvious end in sight.
However, Musk also pointed to unforeseen challenges as a reason for the company’s underperformance. “We navigated several unforeseen challenges as well as the ramp of the updated Model 3 in Fremont. As we all have seen, the EV adoption rate globally is under pressure, and a lot of other order manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. We believe this is not the right strategy, and electric vehicles will ultimately dominate the market,” Musk said in the Q1 earnings call.
Am I Underestimating Tesla’s AI Potential?
In Q1,
Tesla’s free cash flow turned negative. The Austin-based company reported a deficit of $2.53 billion, representing a significant change from a year ago when Tesla had a free cash flow of $441 million. In the fourth quarter of 2023, Tesla reported free cash flow of $2.06 billion. Tesla explained that the negative cash flow was due to a $2.7 billion increase in inventory and $1 billion in capital expenditures on artificial intelligence (AI) infrastructure.
AI is certainly the buzzword of investing at this moment in time, and I don’t believe that it’s overused. However, some analysts are arguing that investors shouldn’t be valuing Tesla as a car company but as a tech company at the forefront of AI.
I’m a little skeptical about this, even though I appreciate that Tesla has AI capabilities in areas like manufacturing, the Tesla Bot, and energy trading. So far, though, I’m yet to be convinced that these are parts of the business with revenue-generating capacity that is remotely comparable with car production.
Of course, the AI-enabled Robotaxi could change my opinion. The question is whether Tesla has really managed to achieve a quantum leap in autonomous technology. This would truly put Tesla in the driving seat and establish its dominance in the autonomous segment.
The growth of the Robotaxi segment would also open up another revenue-generating segment, which does look highly attractive. Autonomous cars require lots of computational power, but that power would only be used when the vehicle is active. This means these impressive computers will only be used a fraction of the time.
Similar to Amazon (
NASDAQ:AMZN
) Web Services, Tesla could sell this spare capacity and create a new and potentially sizeable revenue stream. “It seems like kind of a no-brainer to say, OK, if we’ve got millions and then tens of millions of vehicles out there where the computers are idle most of the time that we might well have them do something useful,” Musk said in the Q1 results call, adding that Tesla could have 100 gigawatts of “useful compute.”
Tesla’s Valuation and Musk’s Promises
Musk has a habit of overpromising and underdelivering. So, this is why I remain bearish on Tesla. I’ve yet to see evidence that Tesla is about to drop a fully autonomous vehicle, which happens to have spare computational capacity that can be used and sold as part of some Tesla cloud.
This wouldn’t be a problem if Tesla’s valuation was in line with its peers. However, Tesla is currently trading around 70x forward earnings. What’s more, analysts clearly aren’t convinced that growth will pick up in the medium term, with a price-to-earnings-to-growth ratio of 5.75x.
For now, the promise of an autonomous vehicle appears to be keeping the share price elevated despite the lack of concrete information. All eyes, therefore, are on August 8. I believe the stock could tread water until then.
Is Tesla Stock a Buy, According to Analysts?
On TipRanks, Tesla comes in as a Hold based on nine Buys, 15 Holds, and nine Sell ratings assigned by analysts in the past three months. The
average Tesla stock price target is $174.60, implying 6.4% downside potential.
The Bottom Line on Tesla Stock
Personally, I’m skeptical as to whether Tesla has really made a breakthrough in autonomous vehicles. Nonetheless, I accept that Robotaxi and fully autonomous vehicles, in general, have huge potential. This potential isn’t limited to the road but also, as Musk discussed, the ability to sell unused computing power to the rest of the market. However, at 70x forward earnings, I simply can’t put my money behind Tesla.
Disclosure
(RTTNews) - A group of Tesla, Inc. (TSLA) shareholders is urging investors to vote against CEO Elon Musk's $46 billion compensation package, citing it as detrimental to the company's best interests.
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