XPeng stock upgraded by BofA analyst on Volkswagen partnership
XPeng (XPEV) shares rise as the stock received an upgrade from Bank of America to "buy" from "neutral" and a $22 price target. The company's partnership with Volkswagen (VOW3.DE) was one of the factors for the upgrade. Yahoo Finance Live takes a look at the stock's reaction.
Video Transcript
JULIE HYMAN: Let's talk about that other EV maker that you alluded to, and that is XPENG. The company getting a boost this morning after Bank of America upgraded the Chinese EV maker from neutral to buy, saying that cost controls should allow it to turn profitable by 2025. XPENG recently announced disappointing numbers and their shares fell. So a bit of a rebound from that level as well. So the analysts there-- Ming Hsun Lee is looking at improved gross margins in 2024 and 2025.
JARED BLIKRE: From negative levels.
JULIE HYMAN: So I guess you would-- there's no place, but up from there. But the estimates are for vehicle gross profit margin to be 0.8% this year, then jumping to 10.2% next year, and 14.5% in 2025.
JARED BLIKRE: You can go through the numbers. They have suffered significantly there in China as many companies have. Even the year-over-year numbers were quite a bit disappointing in a few areas. But I think the investment by Volkswagen-- and this is touted by a lot of the analyst community here, that there were some going concerns with this company, which means there were doubts of whether they could proceed in business, whether they could stay afloat here.
And now, this partnership with Volkswagen, their investment is $700 million. Seals the deal that, OK, this is a legitimate enterprise and they're going to keep manufacturing vehicles going forward. Who knows about necessary capital raises? But this is a company that is actually delivering what-- they're going to look to deliver 39,000 to 41,000 vehicles.
JULIE HYMAN: I was going to say, their deliveries are real.
JARED BLIKRE: These are actual numbers. These are real numbers.
JULIE HYMAN: And they're also looking at selling outside of China, something else that XPENGs were working on. By the way, the Bank of America note wasn't the only note on the company today, I should mention. As well Nomura is rated neutral on the stock, but did raise the price target to $14 from $8.
Jefferies has a buy-on and says, the company is on track for a meaningful turnaround. So basically, the analysts coming out here in the wake of the earnings and trying to figure out what the next move is. And it seems like the tenor is a little bit more positive as they take a day or two and take a beat to figure out what's going to happen with XPENG.
JARED BLIKRE: And I just want to point out these EV shares. Can we go to the YFI Interactive one more time? These EV shares have been highly volatile. And in fact, we saw this massive short squeeze into the middle of July. A lot of US stocks came into this. And we've seen a backoff from a lot of these highs, and XPENG is just one of the others.
One of the thing that strikes me is, though, the street-- and we're going to-- I'm going to talk about this in the upcoming segment. The street is really up their shorts on this downtrend in stocks overall. So that just means the pain trade probably going to be up going forward.
