Should you buy XPeng stock? (July 2024)

Published first at https://www.3minutebreakdowns.com
Xpeng stock analysis. Ticker: $XPEV

Chinese car company Xpeng has had a wild few years. Despite delivering over 400,000 vehicles, the stock has fallen 87% from its 2021 peak.

At the latest price, Xpeng now has a market cap just under 7.3 billion dollars. With 5.7 billion of cash and investments on its balance sheet and 1.6 billion of long term debt, the enterprise value is 3.1 billion. Revenue over the last 12 months comes to 4.6 billion but net income, adjusted ebitda and free cash flow are all negative as the company has yet to reach profitability.

The problem facing XPENG is the same for many other EV companies around the world, a slowdown in consumer demand for electric vehicles and a vicious price war. Industry leaders BYD and Tesla have continued to cut prices putting pressure on smaller players which has caused many companies to go under. Chinese carmakers Li Auto, Nio and Xpeng are al facing the same pressures to keep prices low.

The problem for Xpeng is that even with gross margins improving to nearly 13% in the first quarter, there simply isn’t enough room to compete on price and still turn a profit. The company remains a long way from breakeven, with Adjusted EBITDA margins likely to be about negative 13% next year. The company needs more scale to close that gap. Meanwhile, the US and Europe continue to penalize Chinese car makers with import tariffs. So, XPENG still has a lot of work to do and a lot more cars to sell if it is to reach profitability.

Even so, Xpeng does have some positive attributes. The cars, themselves, are innovative and well-reviewed with full self-driving capabilities to come next year. Vehicle sales are increasing rapidly and Xpeng prices are still lower than most even after tariffs have been applied.

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