Sign InXPeng Inc. Shows Potential as a Buy with Positive Q2 Earnings and Bullish Technical Trend
Summary
XPeng Inc. is a Chinese electric vehicle manufacturer that recently reported Q2 earnings and sales miss, but has received a positive market response and a partnership with Volkswagen, leading analysts to recommend buying the stock with a target price of $22, indicating a potential upside from the current price despite potential risks in the competitive landscape and profitability. (August 25, 2023)
Fundamental Analysis
XPeng Inc. (XPEV) is a Chinese electric vehicle (EV) manufacturer listed on the NYSE, with a market cap of $15.18 billion. The company has reported an Earnings Per Share (EPS) of -$1.55 and their Price-to-Earnings ratio stands at -11.31, indicating that the company is not profitable as of the provided data snapshot.
The company has recently reported Q2 earnings and sales miss which led to 7.2% gain in the share price, despite anticipating a YoY increase in deliveries between 31.9% to 38.7% for Q3. This suggests an optimistic outlook from the market but needs to be weighed against the fact that the company reported a larger-than-expected quarterly loss due to rising competition, causing the shares to slide 5% in early trading.
The company has been in the recent news due to a partnership with Volkswagen, prompting Bank of America to upgrade XPeng stock from "neutral" to "buy", with a target price of $22. This reiterates the bullish sentiment derived from the market's response to their Q2 earnings announcement and signals a potential positive catalyst for the stock price moving forward.
Technical Analysis
XPeng closed on August 25, 2023 at $17.53, an 8.21% increase amounting to $1.33, with a day's trading volume of 19.30 million that falls short of the average volume of 21.60 million shares. The stock has shown a decent price movement, trading between the day's range of $16.40 and $17.58.
The current price is considerably above both the 50-day and 200-day moving averages, which stand at $15.16 and $10.94, reflecting a bullish trend in the medium to long-term for XPeng. This bullish sentiment is supported by the positive Relative Strength Index (RSI) of 42, suggesting the stock isn't overbought or oversold at the current price level.
Meanwhile, the Moving Average Convergence Divergence (MACD) shows a value of -0.37, signifying a slight bearish reversal trend, which contradicts the bullish sentiment observed in other technical indicators.
On the downside, XPeng has a support level at $14.98 and a stop-loss at $16.80, while the resistance level stands at $19.46.
The Average True Range (ATR) shows a value of 7.29, indicating substantial price volatility. This, coupled with the EPS and competitive threats, could indicate potential risks moving forward.
Predicted Stock Performance
Given the current trend, the stock price on the next trading day, August 28, 2023, might experience moderate fluctuations considering the predicted volatility. However, given the medium to long-term bullish trend, the stock price could possibly nudge closer to the resistance level of $19.46 over the upcoming week.
Final Evaluation
Analysts have a consensus "Buy" recommendation on the stock, with 9 recommending "Buy", 3 recommending "Hold", and 1 recommending "Sell". Their median target price is $22, indicating a potential upside from the current price. The discounted cash flow analysis also suggests a fair value of $26.06, which greatly exceeds the current price.
Therefore, given both the fundamental and technical analysis, along with analyst recommendations, XPeng stands as a potential Buy. Future investors should, however, keep a close eye on the competitive landscape and the company's ability to navigate challenges while progressively improving its profitability. This analysis does not guarantee future performance and potential investors are always advised to conduct their own thorough research.
