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On Tuesday, Citi adjusted its financial outlook for XPeng Inc. (NYSE:XPEV), a Chinese electric vehicle manufacturer, by reducing the price target to $7.60 from the previous $8.30. The firm sustained its Neutral rating on the stock.
The revision follows an evaluation of XPeng's newly launched MONA model and the progress of its Advanced Driver-Assistance Systems (ADAS). Citi's analysis led to a modest increase in projected sales volume for the years 2024-2026, estimating a 1-3% rise due to the potential sales boost from the MONA model.
Despite the increased volume forecast, Citi anticipates a decrease in revenue projections for the same period. The expected revenue has been lowered by 5-7%, a change attributed to the Average Selling Price (ASP) dilution caused by the introduction of the MONA model.
The revised price targets are based on the same 1.3x 2024 estimated Price to Sales (P/S) ratio previously applied. Consequently, the target prices have been adjusted from $8.30 to $7.60 in the United States and from HK$32.20 to HK$29.80 in Hong Kong markets.
The report from Citi concludes with a reaffirmation of the Neutral rating on XPeng shares, signaling a cautious but unchanged stance on the company's financial outlook.
In other recent news, XPeng Inc. reported a narrowed net loss for the second quarter of 2024, with a total revenue surge of 60% year-over-year, attributed to service-related income, including technical service fees from Volkswagen (ETR:VOWG_p). The company's vehicle gross margin rose to 6.4%, surpassing Morgan Stanley's forecast, and it's non-vehicle gross margin was robust at 54.3%. Operational expenses remained consistent with previous figures, reflecting improved operating leverage within the company.
Morgan Stanley maintained an Overweight rating on XPeng following these financial results, while BofA Securities reduced its price target on XPeng shares but retained a Buy rating. This followed XPeng's decision to exclude LiDAR technology in its upcoming P7+ model, a move expected to lower production costs and increase gross profit margin.
On the other hand, Citi upgraded XPeng's stock rating from 'Sell' to 'Neutral' and raised the price target, citing a stronger upcoming model cycle and the introduction of a new smaller car model as key reasons for the upgrade.
In additional updates, XPeng has announced a collaboration with Volkswagen AG (OTC:VWAGY) to speed up the development of a new architecture for electric vehicles. Despite projecting its third-quarter revenue to fall below market expectations due to intense competition and reduced demand for its older, more expensive electric vehicle models, the company anticipates delivering between 41,000 and 45,000 vehicles in the third quarter.
InvestingPro Insights
As investors digest the revised outlook from Citi on XPeng Inc. (NYSE:XPEV), it's crucial to consider key financial metrics and analyst tips that could influence investment decisions. According to recent data from InvestingPro, XPeng holds a market capitalization of approximately $6.43 billion, reflecting its significant presence in the automobile industry. Despite a challenging financial performance, with a negative P/E ratio of -4.9 over the last twelve months as of Q1 2024, the company has demonstrated robust revenue growth of 41.64% during the same period. This growth is further highlighted by an impressive quarterly revenue increase of 62.35% for Q1 2024, indicating a strong market demand for XPeng's vehicles.
InvestingPro Tips offer additional insights into XPeng's financial health and market position. The company is a prominent player in the automobiles industry and holds more cash than debt on its balance sheet, which could provide a cushion against market volatility. However, it suffers from weak gross profit margins, which stand at 3.95% over the last twelve months as of Q1 2024. This could be a concern for investors looking for companies with stronger profitability. Analysts also note that XPeng's stock price has been quite volatile and is trading near its 52-week low, which may present a buying opportunity for some investors or a warning sign for others.
For those seeking a deeper analysis, there are 11 additional InvestingPro Tips available at https://www.investing.com/pro/XPEV, which can provide further guidance on XPeng's financial outlook and stock performance.
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