XPeng (XPEV): Robust deliveries growth. New models will ensure that growth sustains through 2023. International market expansion catalyst.
Ample research on the psychology of investing indicates that investors overreact on both sides. There are times of extreme euphoria followed by periods of over bearishness. These market sentiments, in general, are reflected more in growth stocks or high-beta stocks.
It follows that growth stocks are subject to phases of overvaluation and undervaluation. One of the best strategies to consistently beat the index and beat inflation is to spot undervalued growth stocks. When the sentiments change, the rally can be sharp and returns robust.
The markets have gone through challenging times in the last few months. Factors like interest rate hikes, inflationary pressure and geopolitical tensions have resulted in relatively depressed sentiments. There have been several growth stocks that have corrected significantly on the back of growth concerns. Some of these stocks already look undervalued as compared to their growth potential.
I believe that it’s a good time to consider some exposure to these undervalued growth stocks.
Undervalued Growth Stocks to Buy: XPeng (XPEV)
Among Chinese electric vehicle stocks, XPeng (NYSE:XPEV) seems to be the most attractive name to consider. After having declined by 21% in the last 12-months, XPEV stock looks undervalued. In particular, with the company registering robust growth.
Even with chip shortage concerns, XPeng reported a 263% year-on-year (YOY) growth in vehicle deliveries in 2021. For the first quarter of 2022, the momentum has remained strong with 159% growth in vehicle deliveries.
It’s likely that delivery growth will remain robust through 2022 and 2023. The mass delivery of P5 commenced in October 2021 and will positively impact growth through 2022. Additionally, the company’s G9 SUV is scheduled for deliveries in Q3, 2022. The new model will contribute to growth in 2023.
It’s also worth noting that XPeng reported vehicle margin of 10.9% for Q4 2021. On a year-over-year basis, margin improved by 410 basis points. As deliveries continue to increase, the company is positioned for stronger EBITDA level numbers.
International expansion is another reason to be bullish on XPeng. The company already has presence in Norway, Sweden and Netherlands. With Europe looking to reduce dependence on Russia for energy, the EV segment is likely to gain further traction.
Overall, XPeng is among the top undervalued growth stocks to consider. I expect XPEV stock to double from current levels in the next 12-months.
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