The interior of an Xpeng P7 EV outside the New York Stock Exchange in New York
Jeenah Moon/Bloomberg
Chinese electric vehicle maker XPeng reports earnings Monday before the market opens for trading. Bullish investors hope results will stop the stock’s recent slide.
Here’s what to expect Monday morning, along with some recent history.
XPeng (ticker: XPEV) shares are down more than 30% over the past couple of weeks and more than 60% from their 52-week high. The drop has been surprising and precipitous.
Two things are to blame. First, February deliveries declined sequentially from January. That jarred investors who expect growth. But February is the Lunar New Year holiday which XPeng, along with peers NIO (NIO) and Li Auto (LI), said impacted sales.
The second reason is inflation. Investors are worried about inflation, and as bond yields rise richly valued, high-growth stocks are hurt more than older, slower growing companies. High growth firms generate most of their cash flow, and potential dividends, far into the future. Waiting becomes harder when investors can make more interest today from higher yielding assets. What’s more, funding all that growth becomes a little more expensive as bond yields rise.
XPeng qualifies as a richly valued, high-growth company. Shares trade for roughly 9.5 times estimated 2021 sales. The Russell 1000 Growth Index, for comparison, trades for less than 5 times estimated 2021 sales. What’s more, analysts expect XPeng sales to grow almost 150% in 2021.
Analysts also expect XPeng to report a 14 cent per share loss from about $418 million in sales. That is up from the third quarter, when XPeng reported a 16 cent per share loss from about $288 million in sales. Shares rallied 33% the day the company reported numbers back in November.
There isn’t an easy year over year comparison because XPeng sold shares to the public in an IPO this past summer.
XPeng is the last of the three U.S. listed Chinese EV makers to report earnings. Both NIO and Li Auto beat analyst sales expectations and their own company guidance. It wasn’t enough for shares though. NIO stock fell almost 13% after reporting numbers about a week ago. Li shares fell almost 10% after the company reported fourth quarter numbers.
Investors aren’t facing the same set up for XPeng. It’s shares are down about 21% since Li reported earnings.
To get the stock to break out of its funk, investors will want to hear that growth will continue. That means EV sales in China recovered after the New Year’s holiday. It also means that XPeng will have to show investors the automotive microchip shortage won’t hurt production.
The chip shortage has come up on several earnings conference calls including NIO and General Motors (GM). GM says the shortage is a billion dollar profit headwind in 2021. NIO says the shortage is preventing the company from ramping up to full production. Both companies hope the shortage will be a thing of the past in the second half of 2021.
Investors will also want to hear about new battery options being offered by XPeng, which recently announced it would cell cars with lithium-iron-phosphate batteries. They are a little cheaper and have less range. But not everyone needs a 200 or 300 mile per charge range and would prefer the lower price. That is what XPeng is betting on anyway.
XPeng stock is down about 35% year to date, worse than comparable changes of the S&P 500 and Dow Jones Industrial Average. Despite the recent dip, analysts are still bullish. Almost 70% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the Dow is about 57%.
