As the electric car company prepares to report its first quarter earnings, the share prices of both its US and Hong Kong dual listings have seen similar slides of more than half its value in the year so far. Despite delisting threats, ongoing semiconductor shortages and China’s zero-Covid-19 policy, analysts are forecasting positive revenue growth.
Electric vehicle (EV) maker XPeng [XPEV] is set to report first quarter earnings on 23 May amid a backdrop of increasing scrutiny and delisting threats for the stock.
The company’s own guidance for the quarter forecasts revenue of RMB7.2bn–7.3bn, implying a year-over-year increase of around 144%. Deutsche Bank forecasts revenue of RMB7.41bn and an adjusted earnings per share loss of RMB2.33, while analysts polled by Bloomberg predicted revenue of RMB7.37bn and a RMB1.9 loss per share.
The earnings update comes at an interesting time for US-listed Chinese stocks. While Beijing is cracking down on tech stocks going public on overseas exchanges, the US is threatening to delist Chinese companies if they won’t give regulators access to their books, and XPeng is one of the firms potentially in the firing line.
On 5 May, the US Securities and Exchange Commission (SEC) expanded a provisional list of firms facing expulsion from US exchanges. Along with XPeng, more than 80 names were added including Nio [NIO], Pinduoduo [PDD] and JD.com [9618.HK].
A tale of two listings
Up till recently, XPeng appeared to be one of the safer US-listed Chinese stocks. It has a dual-primary listing, appearing on the Hong Kong exchange under the ticker 9868.HK and on the New York Stock Exchange as XPEV. As recently as December 2021, XPeng’s president Brian Gu said the threat of being delisted was “several years away”.
Ahead of Xpeng’s earnings, how are its two stocks faring by comparison? XPeng’s NYSE listing has had a dire year to date. The stock plummeted 53.1% to the close on 19 May, hitting $23.61. Its HK listing is only slightly ahead, down 51.3% year-to-date to HKD90.85 on 19 May.
On 5 May, the day after the SEC announced the list, its US shares [XPEV] were trading down by 13.5%, while its Hong Kong’s shares [9868.HK] were down 10.9% a day later on 6 May. Rival Chinese EV maker Li Auto [LI] — also at de-listing threat — was down 5.5% on 6 May, while fellow competitor Nio was down 15.2% on 5 May.
Q4 deliveries see an uptick
XPeng delivered its last set of results, for Q4 2021, on 28 March. It reported quarterly revenues of RMB8.6bn, representing year-over-year growth of 200.1%. According to Zacks, its earnings loss of $0.22 per share was a “breakeven surprise”.
It also reported quarterly deliveries of 41,751 vehicles, a better-than-expected rise of 222% on the 12,964 delivered in the same period in 2020. Around half were its P7 smart sports sedan, seen as a rival to Tesla’s [TSLA] key Model 3.
The day after its earnings update, Citi analyst Jeff Chung reiterated his ‘buy’ rating on the stock, calling the company a top pick for the EV sector following its promising Q4 results. According to Chung, the company has a “very strong” order backlog and could see long-term growth if lithium prices fall and delivery numbers remain robust. However, he lowered the stock’s price target from $92 to $67.
Chinese EV growth?
With delisting threats, ongoing semiconductor shortages and China’s zero-Covid policy — not to mention what Elon Musk terms “insane” lithium costs and the Ukraine war — it’s tough times for XPeng stock. Growth stocks in general are struggling.
But XPeng may have positive prospects if it can motor on with soaring sales. There are big plans to up its production capacity from 100,000 cars a year to 200,000 at its Zhaoqing factory in Guangdong province, with a second plant in Guangzhou manufacturing soon and a third scheduled to open in Wuhan.
This might result in short-term expenditure, but should equate to stronger growth. Meanwhile, by 2024 it intends to mass produce its much-touted ‘flying cars’. Its earnings might have been trending negatively, but investors remain bullish.
In April, analysts at HSBC set a ‘buy’ rating and a $37 target price for the stock. Of the 28 analysts polled by CNN Money offering a recommendation for XPEV stock, 23 advise a ‘buy’. The median price target for 26 analysts is $42.39, which is 79.5% up from the closing price on 19 May of $23.61.