Often I wonder these days whether the proliferation of electric vehicle sector companies would require me to rent an autonomous-driving EV to tour every living factory. What, you say autonomous EVs don’t exist? Then it’s time you took a closer look at Xpeng Inc. (NYSE:XPEV), the Chinese EV maker that unveiled autonomous highway driving features just this month. For those who hold Xpeng stock, it’s a move to applaud.
With the rollout of its Navigation Guided Pilot (NGP), the company accomplishes two things. First, Xpeng differentiates itself from two competitors at home, Nio (NYSE:NIO) and Li Auto (NASDAQ:LI). And second, it throws down the gauntlet with Tesla (NASDAQ:TESLA) in the EV race to establish autonomous driving dominance.
For the Xpeng faithful, the timing couldn’t be better. Unlike shares of Tesla and Nio, Xpeng stock has been flagging since Nov. 23, when it hit an all-time high of $72.17 per share. Since then, it’s dipped 28%. But with some short-term momentum in January and the new technology hitting the market, 2021 could hold bigger and better things. Let’s see for ourselves.
Xpeng Stock and a Potential Roadblock
Purchasing Xpeng stock roughly equates to a bet on autonomous driving. I believe this technology represents the future. But two nagging questions remain: Do motorists trust it? And at this point, should they?
Reliable figures from China are hard to come by. Closer to home, a March 2020 paper published by the prestigious Institute of Electrical and Electronics Engineers sums up the promise and problem: “Automated driving systems promise a safe, comfortable and efficient driving experience. However, fatalities involving vehicles equipped with ADSs are on the rise.”
Where Xpeng stock is concerned, one can view this two ways. Either the company has taken a brave march into autonomous driving as it will evolve over the 2020s. Or, its quest to pioneer is risky for a company that’s not even seven years old and just went public in August.
Will Competitors Become Copycats?
For my part, I don’t believe being first in tech is necessarily best. Often, the advantages fall not to the trailblazers but the fast followers. Back in the day when Google, now part of Alphabet Inc. (NASDAQ:GOOGL), brushed up against the mighty Yahoo, it rose up to crush it. In the videotape wars, a second-rate format called VHS, invented some time after market leader Betamax, likewise assumed consumer dominance.
But autonomous driving systems and videotapes are two different matters entirely. Has Xpeng discovered and hence worked out any potential software bugs with its WiFi updates to the sporty P7 sedan? Rollouts without software bugs are rare events indeed.
Or will Tesla and Nio, much bigger EV gorillas, study and copy Xpeng’s innovations and thus improve on them? Don’t bet against this as you mull over an Xpeng stock purchase. Tesla already has its Autopilot system. Nio is hard at work on NIO Pilot.
All Hail Xpeng’s P7
All that said, Xpeng has beavered away on this technology as part of a more complete suite of digital features to make its P7 an attractive consumer option. Sleek and luxurious, this four-door fastback sedan was brought to life by French designer Rafik Ferrag. Call it a zoooooom in the making for Xpeng stock.
And so far, the P7 is a huge hit. Sales have from May 2020 have increased in every month but one through December 2020. From an overarching view, 192 P7s were sold in May. In August, the tally landed four shy of 2000. And in December, 3,691 P7s were sold — a month-over-month jump of 35%.
What does Wall Street think of all this? CNN Business shows a buy consensus for Xpeng stock, with seven of 11 analysts giving it a buy rating, two a hold and two a sell. Earnings per share are underwater at -$1.03 — but here’s where it gets exciting. The median price target over the next 12 months is expected to climb by 580%.
Here’s Why to Buy
InvestorPlace’s own Mark A. Hake concurs, adding that if you pit Xpeng against overall growth in the Chinese EV — a smart metric to use if you ask me — XPEV stock is worth 31% to 100% more than its current price.
In my last piece on Xpeng stock, I came off positive (though with the usual “new company proving itself” qualifications). But that was before December’s P7 sales came in and the January ADS system breakthrough.
These reasons alone tip the scales even more towards a buy. Share prices are low, vehicle sales are high and the lights are green. Let’s go for a ride, shall we?
On the date of publication, Lou Carlozo held long positions in NIO and TSLA.
View more information: https://investorplace.com/2021/02/xpeng-stock-is-primed-to-pop-after-its-autonomous-driving-breakthrough/