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Investing.com -- JP Morgan downgraded Xiaomi (OTC:XIACF) Corp (HK:1810) to Neutral from Overweight, saying company has strong fundamentals but a stock price that has run ahead of its underlying growth potential.
Brokerage lowered its price target to HK$60, saying the current valuation leaves little room for upside.
“While fundamentals remain strong, the stock is already pricing in a lot of optimism on continued strong EV ramp-up, upside in IoT and smartphones due to consumption subsidies, and Xiaomi’s share gains,” the analyst said.
“Some expectations of breakthrough in fresh areas such as Smart glasses, Robotics and AI, which are as yet unproven”
JP Morgan noted that Xiaomi’s market cap is now only behind Chinese tech giants Tencent (HK:0700) and Alibaba (NYSE:BABA), and already 17% higher than BYD (SZ:002594), making it the second most valuable EV vendor globally after Tesla (NASDAQ:TSLA).
Xiaomi’s car business, which recently launched the SU7 EV model, has a strong backlog and the upcoming YU7 SUV is expected to boost EV shipments.
However, JP Morgan warned that “the stock is already discounting ~1.75 million EV shipments in 2030, leaving limited room for upside in expectations.”
Xiaomi’s core business remains healthy, with mid-teens growth expected over the next 2-3 years. While smartphone revenues are projected to grow 20% in 2025, growth may slow by 2026 as the impact of consumption subsidies fades.
IoT expansion and gains in higher-margin categories such as white goods are expected to support resilient margins.
The brokerage sees expectations around AI, smart glasses, and robotics as overly optimistic, cautioning that these innovations are unlikely to materially contribute to earnings in the near term.
“Xiaomi is a great hardware company, but we do not expect it to transition into a platform business in the next 3-5 years,” analyst added.