Bullish indicating open at $55-$60, IPO prices at $37
On Wednesday, Macquarie analyst Eugene Hsiao upgraded XPeng (NYSE:XPEV) stock from Neutral to Outperform, setting a new price target of $24.00. The upgrade for the $20.8 billion market cap company comes after XPeng reported its first-quarter results for 2025, which included a vehicle margin increase of 10.5%, up 50 basis points quarter-over-quarter, despite a 4.4% decline in sales per car. According to InvestingPro data, XPeng’s gross profit margin stands at 14.64%, reflecting the company’s improving operational efficiency. The improvement was attributed to enhanced cost control and scale benefits. Additionally, service margins hit a record 66% due to better aftermarket margins, and the net loss for the company narrowed to Rmb0.66 billion, moving XPeng closer to breakeven. The firm also reported positive free cash flow (FCF) of over Rmb3 billion in the first quarter of 2025. InvestingPro analysis shows that while XPeng holds more cash than debt on its balance sheet, it remains unprofitable with a net loss of $793.3 million in the last twelve months.
The analyst expressed concerns over the net loss improvement, which was partly due to an unexpected other income of Rmb544 million from government subsidies and foreign exchange gains of Rmb130 million, both considered to have low visibility. Moreover, the implied monthly run-rate for May and June, based on the midpoint of guidance, is projected to remain flat compared to April deliveries, despite the introduction of refreshed models and new variants.
XPeng’s second-quarter guidance forecasts a volume of 102,000 to 108,000 units, marking a significant year-over-year increase of 238% to 258%. The midpoint of this guidance, 105,000 units, surpasses the estimates by Bloomberg and Macquarie’s own previous estimates, which both stood at 103,000 units. This ambitious growth aligns with InvestingPro’s forecast of 97% revenue growth for fiscal year 2025, making XPeng one of the fastest-growing companies in the automotive sector. Get access to 10+ additional InvestingPro Tips and comprehensive analysis in the Pro Research Report. The revenue guidance for the second quarter is also higher than expected, ranging from Rmb17.5 billion to Rmb18.7 billion, compared to the Bloomberg and Macquarie estimates of Rmb17.3 billion.
Management at XPeng has reaffirmed its target for more than double volume growth by 2025, aiming for over 380,000 units, and anticipates reaching net profit breakeven by the fourth quarter of 2025 with a high-teen gross profit margin (GPM). The company also maintained its research and development budget for the fiscal year 2025 at Rmb8.5 billion.
In light of the first and second quarter sales trends, Macquarie has increased its volume forecasts by 5% for the fiscal year 2025 to 473,000 units, which has led to a 6% rise in sales estimates and a reduced net loss estimate. The stock has shown strong momentum, delivering an impressive 124.5% return over the past year, though investors should note its high volatility with a beta of 2.63. The new price target of $24.00 represents a 7% to 9% increase from the previous target, with Macquarie continuing to apply a 2.0x price-to-sales multiple for the fiscal year 2025 estimates. The analyst anticipates that new model launches, a faster-than-expected path to breakeven, rapid international expansion, and the commercialization of humanoid and electric vertical takeoff and landing (eVTOL) vehicles could be potential catalysts for XPeng’s stock.
In other recent news, XPeng reported robust financial results for the first quarter of 2025, with sales reaching RMB 16 billion, a 141% year-over-year increase. The company’s revenue exceeded its own guidance, driven by strong vehicle deliveries of 94,000 units. XPeng’s gross profit margin rose to 15.6%, supported by cost reductions and economies of scale, while the vehicle margin improved to 10.5%. Analysts from BofA Securities and Morgan Stanley (NYSE:MS) maintained positive ratings on XPeng, with price targets set at $29 and $26, respectively. XPeng also announced the launch of its new P7+ sedan, featuring a faster-charging battery, which was unveiled at the 2025 Shanghai auto show. This new model is positioned competitively with a starting price of RMB 208,800 ($28,570) and is expected to attract consumers looking for quick-charging electric vehicles. April sales figures showed XPeng delivering 35,045 units, nearly tripling compared to the same period last year, indicating strong demand in the Chinese EV market. Despite these positive developments, XPeng’s stock, along with other Chinese stocks, faced pressure amid escalating trade tensions between the U.S. and China.
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