XPeng Analysts Lift Price Targets On China EV Market Fundamentals, Software Biz

Xpeng Inc – ADR XPEV reported last week strong quarterly results, sending its shares rallying by about 33.5% in a single session.

The XPeng Analyst: Citigroup analyst Jeff Chung maintained a Buy rating on Xpeng shares and increased the price target from $34.70 to $57.71.

JPMorgan analyst Nick Lai maintained an Overweight rating and hiked the price target from $43 to $50.

Citi On XPeng's Software Business: Chinese NEV sales momentum will continue into the first quarter, Citi analyst Chung said in a note. Once battery sufficiency is achieved, Xpeng is on track to deliver more than 3,000 P7 cars in January, the analyst said.

This would help gross profit margin to expand further to 7.6% in the first quarter and 12%-13% in 2021, he said.

Factoring in software income, the analyst raised his gross profit margin forecast for 2021 and 2022 to 14% and 17.4%, respectively.

XPeng's software business is likely to have a valuation of $7.65 per share, Chung said.

Related Link: Nio, Li Auto Make Big Moves Following Xpeng's Q3 Results

XPeng To Benefit From Multiyear EV Trend: The commentary and fourth-quarter guidance underlines the strong underlying demand, JPMorgan analyst Lai said.

"We also believe the company is implementing the right strategy continuing developing in-house autonomous solution, the main differentiating factor from peers," the analyst said. 

Despite the significant rally since listing, JPMorgan said it remains optimistic on the stock and believes XPeng will benefit from China's multiyear smart EV trend.

The firm projects a 43% compounded annual growth rate over the 2020-2025 period. XPeng's EV market share in China is likely to grow from 1% in 2019 to over 8% by 2025, Lai said. 

XPeng's proprietary in-house XPilot ADAS solution and Xmart operation system should optimize users' mobility experience, the analyst said.

XPeng's XPILOT 3.0, scheduled to roll out in early 2021, will allow customers to subscribe to the service over-the-air, he said.

The analyst is positive on XPeng's strategic midrange segment focus, as this is China's largest addressable NEV market by price point, accounting for about 47% of 2019 NEV sales.

XPEV Price Target: XPeng shares closed Monday's session 5.02% higher at $44.10. 

Related Link: Can Nio's Q3 Earnings Reignite The Rally Cut Short By Citron's Warning?