To The Moon

🌟🌟🌟XPeng's share price has been on a wild roller coaster ride last week!  It is down 6% last Friday and 11% in the past 5 days.  However it is up 80% year todate.  What's happening with $XPeng Inc.(XPEV)$ 

Let's Do A Dive into XPeng. 

The most important news that headlined XPeng was Volkswagen's USD 700 million investment in XPeng.  This means that now Volkswagen owns 5% of XPeng.  This partnership has the tantalising potential to set a precedent for Western automakers to collaborate with their Chinese counterparts to gain exposure to the Chinese market for their EV expertise and for increased funding for the Chinese automakers.

The agreement involves the production of 2 new battery powered models under the Volkswagen brand utilising some of XPeng 's key technologies.  These include XPeng's Vehicle to Anything (V2X) and XNGP solutions, its ADAS system comparable to Tesla's FSD system as well as its battery chassis architecture.

XPeng has earned an enviable reputation for its focus on Advanced Technologies.  XPeng has sought to differentiate itself by investing heavily in its own proprietary Autonomous Vehicle Technology, while its competitors often choose to partner with AV startups.

XPeng has just sold a total of 11,008 EVs in July which is a 4% decline year over year, although it is a 28% increase over the previous month and the 6th consecutive month of delivery growth.  However compared to its rivals, XPeng is lagging behind.  Nio has delivered 20,462 EVs for July, up 104 % increase while Li Auto delivered 34,134 EVs, up 228% versus last year.

XPeng has benefited from the release of G6 Ultra Smart Coupe in June.  XPeng said that it sold 3,900 units of the new model in July.  However XPeng's overall figure for the first 7 months of 2023 is down by 35% at 52,443 EVs.

XPeng 's financial performance has been tough.  For Q1, XPeng' s net losses were wider than expected while gross margins was only 1.7%, down from 12% in the previous year.  This is due to price cuts by its competitors like Tesla and Nio.

So is XPeng a Buy? 

At the current price of USD 18.32, XPeng is trading at about 4x its forward revenues, compared to the peer average of 10.5x. 

With the latest partnership with Volkswagen, 60% of Wall Street Analysts rate it as a Buy.    I am short term Bearish on XPeng but lo g term Bullish on XPeng as it has huge exponential growth ahead with its new Volkswagen partnership.  With this new partnership, XPeng's global reach will be boosted, opening new markets in Europe.

However for now, investors in XPeng should brace themselves for greater volatility ahead to reap the long term benefits of investing in XPeng.

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