Deutsche Bank cut its price target on XPeng Motors to $33 from $43, saying the carmaker is facing a painful strategic turnaround. The bank maintains its Buy rating on Xpeng, citing the company’s assisted-driving technology is undervalued over the long term.
XPeng is in the process of making multiple painful pivots and doesn’t have any clear quick pivot points in sight, the bank’s analysts said in a research note. “We lower our price target by $10 to $33, now based on 2.0x 2023E EV/Sales (vs. prior 2.5x), the low end of the group to reflect a much more painful strategic transition.”
XPeng on Tuesday reported second-quarter revenue that beat expectations, but gave yet another discouraging guidance for the next quarter. The company guided for third-quarter deliveries of 29,000 to 31,000 units, below the consensus estimate of 36,000 units.
China’s EV upstarts are increasingly facing customers with higher expectations for product freshness, forcing them to update their products more frequently, the note said. “In the absence of branding power (e.g., Tesla) or superior post purchase service (perhaps NIO), even very attractive products can suddenly fall out of favor in an environment where competition intensifies and BEV penetration is not increasing steadily.”
The team lower the forecast for XPeng deliveries this year and in 2023 by 10,000 units to 145,000 and 245,000, respectively, and expects gross margins to improve by 4 percentage points next year to about 16%.