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Morgan Stanley maintains Overweight on XPeng stock, citing new model launches and overseas push

EditorAhmed Abdulazez Abdulkadir
Published 06/11/2024, 14:50
XPEV
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On Wednesday, Morgan Stanley (NYSE:MS) showed confidence in the future of XPeng Inc. (NYSE: NYSE:XPEV), a Chinese electric vehicle manufacturer. The firm's analyst lifted the stock's price target to $17.00, up from the previous $11.70, while keeping an Overweight rating on the shares.

The analyst highlighted XPeng's potential to lead in the artificial intelligence (AI) domain, anticipating the company to reveal various technology advancements during its AI Day this year. The firm expects XPeng to continue growing its vehicle and non-vehicle product lines, which should strengthen its competitive edge in the smart electric vehicle (EV) market.

XPeng's recent launch of the M03 model is seen as the beginning of a strong product cycle. The company's sales are expected to benefit from the introduction of new models and an accelerated push into international markets. Additionally, a partnership with Volkswagen (ETR:VOWG_p) is projected to contribute to XPeng's operational recovery from the second half of 2024.

The price target increase to $17.00 reflects Morgan Stanley's positive outlook on XPeng's capacity expansion and innovation in AI. With these developments, the firm envisions a fortified economic moat for XPeng amidst intense competition in the smart EV industry.

The analyst's remarks suggest that XPeng is well-positioned to make significant strides in the coming years, with the latter half of 2024 earmarked as a pivotal period for the company's resurgence.

In other recent news, XPeng Motors, a Chinese electric vehicle manufacturer, introduced its "Kunpeng Super Electric System," an extended-range hybrid technology set to significantly increase the driving range of their vehicles. This innovation follows trends set by other Chinese automakers, such as Li Auto (NASDAQ:LI) and Nio (NYSE:NIO), in response to the European Commission's additional tariffs on Chinese-made EVs. However, XPeng did not specify a launch date for new models equipped with this system.

Simultaneously, XPeng has achieved recognition by securing spots on both the "Fortune Tech 50" and "Fortune China 500" lists, highlighting its advancements in AI-defined mobility technology, autonomous driving, and AI model applications. The company has also entered a strategic partnership with Motor Distributors Limited (MDL) to import and distribute its all-electric passenger cars in Ireland, marking a significant milestone in XPeng's European expansion strategy.

Analysts have given mixed reviews on XPeng's stock. JPMorgan maintained an Overweight rating, projecting a strong third-quarter performance and robust vehicle delivery figures for the fourth quarter. Citi raised XPeng's price target, anticipating increased sales volumes and improved financial forecasts. However, CFRA downgraded XPeng's stock from Hold to Strong Sell, expressing concerns over the company's market position and financial health.

Furthermore, XPeng's second-quarter 2024 financial report showed a 60% year-over-year revenue growth and a gross margin improvement of 14%, despite a net loss of 1.29 billion yuan. Lastly, there are ongoing discussions about a potential partnership between Volkswagen and XPeng, and Didi Global is nearing the final stages of discussions to divest its smart driving and cockpit assets to a subsidiary of NavInfo, AutoAi, for approximately $70 million.

InvestingPro Insights

XPeng's recent market performance aligns with Morgan Stanley's optimistic outlook. According to InvestingPro data, the company has shown a significant return of 77.42% over the last three months and 41.86% over the past six months, indicating growing investor confidence. This trend supports the analyst's positive stance on XPeng's future prospects.

InvestingPro Tips highlight that XPeng holds more cash than debt on its balance sheet, which could provide financial flexibility for its planned expansions and technological advancements. Additionally, the company is noted as a prominent player in the Automobiles industry, reinforcing its potential to lead in AI and smart EV markets as suggested by Morgan Stanley.

However, it's important to note that XPeng is not currently profitable, with a negative P/E ratio of -11.04 for the last twelve months as of Q2 2023. This aligns with another InvestingPro Tip stating that analysts do not anticipate the company to be profitable this year. This information suggests that while XPeng shows promise, investors should be aware of the current financial challenges as the company pursues growth and innovation.

For readers interested in a more comprehensive analysis, InvestingPro offers 8 additional tips for XPeng, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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