Xpeng stock is a buy for its autonomous driving developments, Deutsche Bank says.
Wang Zhao/AFP via Getty Images
Shares of electric-vehicle maker XPeng are a Buy, Deutsche Bank says, but not for rising EV sales in China as you might guess. Rather, it’s for the company’s advancing autonomous vehicle, or AV, technology.
“AV is set to become the EV of 2021,” Deutsche Bank analyst Edison Yu declared in a note Thursday.
A quick look at the performance of EV stocks for the past year reveals just how strong an endorsement Yu’s call really is. Market leader Tesla has seen its stock surge nearly 640% in the past 12 months, while shares of Chinese EV maker NIO have rocketed more than 1000%.
The analyst put XPeng stock (ticker: XPEV) on his “catalyst buy” list Thursday because of the company’s investments in self-driving capabilities. Deutsche uses the “catalyst buy” call when its analysts believe a stock will rise soon. XPeng stock is already up 164% over the past three months, but Yu says the stock will keep rising “following positive media and investor feedback from the test drives of XPeng’s new [level-three] functionality.”
Level three is in the middle of the five levels of autonomous driving. Level zero is no driver-assistance technology at all. Level five means drivers don’t have to do anything and a human driver isn’t needed. Level three is “conditional autonomy”: The driver isn’t required to monitor the driving environment, but needs to be ready to take back control of the vehicle at any time.
XPeng recently revealed details regarding its “Navigation Guided Pilot,” which will be part of the driver-assistance feature package the company calls XPILOT 3.0. The company currently offers XPILOT 2.5 on its vehicles.
Yu believes XPILOT 3.0 will be recognized as the best autonomous-driving feature available. The system “has been tuned to work in adverse weather conditions, complex roads, and without GPS signal,” adds Yu.
The analyst is bullish over the long term as well, rating Xpeng shares Buy with a $58 price target.
Other auto makers are increasingly talking about AV, too—partly because of the success of auto makers such as XPeng in the market. Consumers are starting to associate AV functionality with the top auto brands.
On Tuesday, General Motors ’ (GM) Cruise autonomous driving company took in a $2 billion investment from Microsoft (MSFT) and others. GM stock rose almost 10% that day. XPeng peer NIO (NIO) also reviewed its autonomous-driving technology at the company’s fourth annual NIO day earlier in January. And Tesla (TSLA) is testing a beta version of its full self-driving software this past year.
It seems like high levels of autonomous-driving technologies are hitting roads—not just being talked about in board rooms.
Investors have more ways to play the AV trend, too. There are new laser-based radar, or lidar, stocks—including Veoneer (VNE) and Luminar Technologies (LAZR). Lidar sensors are used by many auto makers to facilitate autonomous driving. And other companies, such as Aptiv (APTV), integrate all the sensors and link them to a car’s central processing center.
Barron’s recently wrote that Chinese EV stocks were too pricey. That hasn’t been a good call. Since the article appeared in December, NIO, XPeng, and Li Auto shares have risen 39%, 16%, and 9% respectively. Tesla stock is up 45% over the same span.
As the most valuable auto maker and EV maker in the world, Tesla’s rise resets valuation marks for all EV stocks.
Write to Al Root at [email protected]
