Xpeng To Lead Autonomous Driving In China? Is XPEV Undervalued?

Trade XPEV Stock Your Capital Is At Risk
Ollie Martin
Updated: 23 Mar 2022

Key points:

  • Xpeng is a critical play in the Chinese EV market, but could be a leader for autonomous driving
  • The company has a diverse range of autonomous offerings, including the G3 SUV, P7 and P5
  • Short term headwinds still exist in the form of geopolitical tensions and supply constraints

Xpeng is a key industry player in the Chinese EV market, currently locking horns with NIO and Li Auto as they rub shoulders for tightening market share. Up 42% from its public listing in August 2020, the company has since had to grapple with Covid-induced cutbacks, supply bottlenecks, and the wider sentiment of global uncertainty. Looking forward, the Chinese market is leading the electric transformation while the US catches up on infrastructure and consumer demand, yet there is still more than meets the eye for China’s recent wave of vehicle manufacturers. 

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Today, CLSA analyst Aaron Li initiated coverage of Xpeng, issuing a Buy rating and a $42 price target. Aside from the usual EV thesis, XPeng has kept a focus on autonomous driving since the company’s birth, a huge emerging market that is hot on the heels of the EV transition. Li believes Xpeng to be the first manufacturer to fully achieve ‘high-level AD’ within the Chinese market. The company is working on a varied product range from the G3 SUV to the medium-sized P7 and P5. 

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There are undoubtedly still headwinds present for the company, including geopolitical tension and continued supply disruptions. Morgan Stanley analyst Tim Hsaio lowered price targets on Xpeng, Nio, and Li Auto this morning given the problems listed above; yet still argues for an Overweight rating on the basis that EVs remain a ‘secular trend’ despite intermittent headwinds. 

If Xpeng is set to be the industry leader for autonomous driving, then investors should relish its current low pricing, with XPEV stock sitting nearly 50% below previous highs. Despite this, short-term disruption continues to weigh on vertical progression. The company needs to consistently hit production and delivery predictions for sentiment to fall back in its favor.

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