Why BofA Is Bullish On Chinese EV Manufacturer Xpeng

Xpeng Inc – ADR XPEV shares have been on a tear, thanks in part to strong deliveries the Chinese electric vehicle maker reported for October.

The Xpeng Analyst: BofA Securities analyst Ming Hsun Lee reiterated a Buy rating on Xpeng shares and increased the price target from $26.40 to $31.30.

The Xpeng Thesis: Xpeng reported stronger volumes for the third quarter and October, and also said order wins remained robust, primarily due to positive feedback for the P7 and upgraded Xmart OS, Hsun Lee said in a Thursday note.

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Xpeng revealed at its "XPeng Intelligent EV Day" event Oct. 24 its latest Xmart OS version, XPILOT system functions and other user experience enhancement strategies, the analyst said.

The XPILOT 3.0 adds new functionalities such as autonomous parking for memorized parking lots and Navigate Guide Pilot, he said. 

XPeng's NGP can better handle the complicated "Chinese road conditions" compared with other OEMs' driving assistance systems, Hsun Lee said, citing the company.

The XPILOT 3.0 will be available anytime between the fourth quarter of 2020 and the first quarter of 2021, the analyst said.

New regulations enacted by Shanghai on Nov. 2 that forbid non-Shanghai license plated vehicles to drive on certain expressways from 7 a.m .to 8 p.m. has increased demand for EV vehicles in the city and will likely benefit XPeng, as around 8% of its sales come from Shanghai, he said. BofA raised its volume estimates for 2020 and 2021 by 13% and 6%, respectively.

The Buy rating is predicated on a robust model pipeline that should boost sales growth and Xpeng's strategies and services to enhance user experience, according to BofA. 

XPEV Price Action: At last check, Xpeng shares, which closed at a record high of $27.40 Wednesday, were rising 21.97% to $33.42.

Related Link: Xpeng Electric Vehicle Deliveries Rise 266% In Q3

Photo courtesy of Xpeng.