Will Q2 earnings support EV-maker XPeng’s share price?

After opening 2021 at $45.60, XPeng’s [XPEV] share price slipped by 15.2% year-to-date, closing 20 August at $38.69. The Chinese electric-vehicle (EV) maker’s stock began the year in good shape after selling American depositary receipts (ADRs) at $45 apiece to raise $2.45bn in December 2020.

However, XPeng’s share price was seriously battered in February and early March amid a wider pullback of EV stocks, falling 38.5% year-to-date to $28.03 by close on 5 March.

The company recovered some of its losses in April before dipping again, with the stock declining to $23.93 by 11 May. The value then nearly doubled to $43.66 by 1 July, following gains for most of June. In early July, the company raised $1.8bn by listing in the Hong Kong market, issuing shares at a discounted price of $21.25 each. The first half of August saw the stock coasting above $40, before seeing a decline in the past few days.

Chinese economy woes

The repeated lockdowns due to COVID, lower production data, and lower-than-expected weak retail sales suggests a soft Chinese economy and corresponding demand for XPeng’s products. The Chinese gross domestic product (GDP) shrunk 6.8% in the first quarter of 2021 compared to the same period last year. Adding to that is the ongoing regulatory crackdown on tech companies that is also expected to hit sales of high-end goods, including automobiles. The global shortage of semiconductors and rising interest rates are two other risk factors. 

XPeng will report its second-quarter ending 30 Jun 2021 earnings on 26 August.

Losses continue in line with peers

Analysts polled by Yahoo Finance estimate loss per share for the quarter ending in June 2021 at $1.21 and the full-year target at $4.42, on revenue of $3.44bn and $16.32bn. Comparable figures from a year ago were not available but analyst estimate its growth is in line with peers like NIO Inc [NIO].

The consensus among 14 investment analysts polled by CNN Money is to buy the stock. Offering a 12-month price forecast,  they set an average target of $52.10, with the high estimate being $71.50 and the lowest $25.57.

On 18 August, XPeng announced it had signed an agreement for an EV manufacturing base in Zhaoqing in the Guangdong province of China, which will double its capacity to 200,000 units annually. The company delivered 58,000 units in the past 12 months and forecast a healthy growth in demand for its smart EVs.

Hong Kong Listing

After its debut on US exchanges just last year, XPeng has moved towards a second public listing in Hong Kong. The move is triggered amidst growing fears of increasing regulatory pressures from the US. Brian Gu, vice chairman and president of XPeng, recently acknowledged this. “I would say our Hong Kong listing is a very strategic decision… hedging against geopolitical risks is only one of the considerations,” read a CNBC interview. The move was aimed at allowing Chinese participation in the company’s shareholding, Gu added.

Meanwhile, California-based Primecap Management added 2.32 million shares in XPeng, raising its total exposure to $295.25m at the end of 2021’s second quarter. The firm manages $148.84bn worth of investments. 

Taking an even more optimistic view, Bin Wang, an analyst with Credit Suisse, said XPeng shares could achieve a price target of $72 this year. This would be a significant 86% growth from its 20 August closing of $38.69, and close to the 52-week high of $74.49 during trading on 24 November, just a few months after its listing. “Considering stronger volumes, we revise up XPeng's 2021-23 bottom-line estimates by 20-34.6%," said Wang.