Sometimes timing is everything. And Deutsche Bank believes now is the time to buy beaten up shares of Chinese electric vehicle maker XPeng.
Tuesday, analyst Edison Yu placed a "catalyst Buy call" on American depositary receipts.
A catalyst call is used by some brokers to demonstrate a sense of urgency because they expect the stock to move soon and for identifiable reasons.
In the case of XPeng, Yu is looking at the launch of the G9, a new SUV unveiled this Summer. XPeng took in more than 22,000 reservations the hour after the launch. Pricing is due this month and deliveries are due to start in October.
Yu expects the SUV price to come in around 400,000 yuan, or about $58,000. The G9 SUV will offer the company's latest computing platform and driver-assistance software. What's more, it will be able to charge fast enough to get more than 100 miles of range in about 5 minutes -- as long as the charger can deliver the electricity quickly enough. Yu expects the SUV to be a strong seller for two or three quarters.
The G9 is a reason to buy the stock now, but Yu has been an XPeng fan for a while -- he's had a Buy rating on the ADRs since launching coverage back in 2020.. He has a $33 price target.
XPeng stock looks like it needs a catalyst. Coming into Tuesday trading, ADRs are down about 68% year to date. XPeng has delivered more than 90,000 vehicles in 2022, through August. That's up from about 46,000 vehicles delivered in the first eight months of 2021. Growth looks solid, but higher interest rates, Covid-19 lockdowns in China, and Chinese/American geopolitical tensions have all weight on investors sentiment.
The declines have left XPeng ADRs trading for roughly 2.7 times estimated 2023 sales. NIO ( NIO) ADRs, for comparison, trade for about 2.1 times sales, and Li Auto $(LI)$ ADRs trade for about 1.5 times sales. (The three Chinese EV makers aren't consistently profitable yet.)
XPeng ADRs are off 2.4% in early Tuesday trading. The entire market is lower after an inflation report came in hotter than expected. The S&P 500 and Nasdaq Composite are off 2.3% and 3%, respectively.
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