With prices of EV stocks like Xpeng (NYSE:XPEV) falling across the market, it’s hard to keep the big picture in sight. While clouded by rising rates and/or the. perception that rates will rise, the EV market is still in its infancy and on the verge of a secular-grade global hyper-growth phase. The market may be down now but it won’t stay down for long.
If you think we’re joking think again. The global EV market is about 3% of net auto sales and expected to top 10% as early as 2025 based on the acceleration we’re seeing. Longer-term, EV is expected to account for upwards of 50% of all auto sales and the timing is sooner rather than later. Not only is legislation pushing consumers towards EV but major automakers like GM are fully committed to it and other alternative fuel choices.
China’s XPeng Is In A Hyper Growth Phase
The goal in EV today is not to establish a market but to get your vehicle to that market. With only a few companies in actual production, getting a new model to market first and then ramping production is a recipe for sustained triple-digit gains. That is where Xpeng is in its cycle. The company has been ramping production over the past two quarters and seen an astronomical surge in growth. The Q4 revenue of $436.99 million is up 50% sequentially and 345% from last year showing that its business has boomed and is still accelerating and at a rate above the analysts’ consensus.
Xpeng’s claim to fame, its niche within the EV market, is smart EVs. Smart EV’s take the car experience to the next level and include voice-activated controls and autonomous driving among other high-tech additions. In the case of Xpeng, their smart cars are built on a propriety end-to-end platform that is helping to drive its growth.
“We spearhead innovation in China’s Smart EV market by pursuing end-to-end R&D and closed-loop of data capabilities. We proudly offer our customers a revolutionary in-car voice system and smart cockpit technology, as well as XPILOT 3.0, our self-developed full-stack autonomous driving system, and we are poised to launch our LIDAR-equipped third Smart EV model in the second half of 2021."
As for guidance, the company didn’t give formal guidance as far as revenue but it was able to update us on sales for the 1st two months of the year. Deliveries of Xpeng’s smart EVs increased by 470% in January and over 1200% in February leading the company to expect about 450% growth for the quarter. This puts deliveries in the range of 12,500 in the Q1 period compared to just over 27,000 for all of 2020. The only negative is that triple digits gains are going to start getting smaller by the second half of the year due to increasingly more difficult comparisons.
The Technical Outlook: It’s Almost Time To Buy XPeng Again
Shares of XPend have been moving lower along with the entire EV complex and may keep falling in the near-term. The Q4 report did little to alter the technical movement and has the stock set up to test for support at or near the $23.50 level. If and when support is confirmed investors should feel safe nibbling at this EV name, when the sentiment shifts back in favor of riskier tech-focused investing we expect to see XPeng and others make a strong rebound. We believe, regardless of where the bottom is found, this stock could be back above $60 by the end of the year.
