Jefferies maintains Buy on Xiaomi stock, price target at HK$63.25

On Tuesday, Jefferies analyst Wei Sim reaffirmed a Buy rating on Xiaomi (OTC:XIACF) Corp (1810:HK) (OTC: XIACF) with a price target of HK$63.25. The firm’s position follows extensive client consultations and a two-week marketing initiative in the United States. The confidence appears well-founded, as InvestingPro data shows Xiaomi has delivered an impressive 161% return over the past year, with three analysts recently revising their earnings expectations upward. Feedback from investors is largely positive, although some concerns have been raised regarding high market expectations and the possibility of a delay in the launch of Xiaomi’s SUV.

The research indicates that all Emerging Markets/Asia funds currently hold Xiaomi shares and support the company’s business narrative. A few global funds are also invested, but the majority have yet to include Xiaomi in their portfolios. The hesitation among global investors is attributed to the rising tensions between the U.S. and China, making them cautious about investing in Chinese stocks at this time. As a prominent player in the Technology Hardware sector, Xiaomi maintains strong fundamentals with a healthy balance sheet showing more cash than debt and robust cash flows to cover interest payments.

Shareholders who are familiar with Xiaomi concur with Jefferies’ analysis of the company’s unique ecosystem and its proven ability to execute its business strategies. However, they consider the anticipated growth in the automotive sector, particularly regarding the SUV launch, to be somewhat optimistic.

The discussion also extends to Xiaomi’s potential in artificial intelligence (AI). While there is a consensus on Xiaomi’s capability to develop personalized AI, the absence of a clear timeline and a commercialization roadmap means that the stock may not immediately reflect this potential. Jefferies’ commentary suggests that while the company’s prospects in AI are acknowledged, the market may not factor in these aspects into Xiaomi’s valuation in the near future.

In other recent news, Xiaomi Corporation has been in the spotlight following a tragic accident involving its SU7 electric vehicle (EV), which resulted in three fatalities. The incident has led to an investigation by local authorities in China, raising concerns about the safety of Xiaomi’s EVs. Meanwhile, S&P Global Ratings upgraded Xiaomi’s credit rating from ’BBB-’ to ’BBB’, citing strong performance in consumer electronics and promising initial results in the EV sector. The agency expects Xiaomi to maintain a stable outlook with healthy EBITDA growth and a significant net cash position.

In a separate development, JPMorgan downgraded Xiaomi’s stock from Overweight to Neutral, despite raising the price target to HK$60. The analysts noted that the current stock price may already reflect high market expectations for Xiaomi’s EV and IoT segments. Additionally, Goldman Sachs increased its price target for Xiaomi to HK$58, maintaining a Buy rating due to recent advancements in artificial intelligence (AI). The firm highlighted Xiaomi’s efforts in AI development and its potential to enhance the company’s ecosystem.

Furthermore, analyst Ming-Chi Kuo from TF International Securities revealed that Xiaomi’s upcoming flagship smartphone, the Xiaomi 16 Pro, will feature a 3D printed metal mid-frame. This innovation is expected to improve the device’s thermal performance and reduce weight. These developments underscore Xiaomi’s strategic moves in various technology sectors, from EVs to AI and smartphones, as the company seeks to solidify its market position.

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