XPeng - Chinese EV Maker In Orbit?

11/25/20 05:18:33 PM

by Matt Blackman

It's been touted as the Chinese 'Tesla' but can it deliver?

Security: XPEV
Position: N/A

Founded in 2015, XPeng Inc. is a leading Chinese smart vehicle manufacturer company that designs and manufacturers smart EVs in China according to its website, and another recent EV addition to US stock markets. It has been proclaimed by pundits as a candidate to become China's biggest electric car maker in a field of more than 300 Chinese automotive start-ups with backing from some of China's biggest tech companies.

It's no secret that the company has utilized at least a few of Tesla's open source patents — a practice that has been encouraged in the country by Elon Musk. The advantages are obvious allowing the company to produce technically advanced vehicles for a fraction of the R&D costs.

Figure 1. Daily chart of XPEV which began trading on the New York Stock Exchange in late August 2020.

Graphic provided by: Freestockcharts.com.

Fundamentally, the company lost $5.06 per share from total operations as of its latest quarterly filing, reporting a net income loss of $271.8 million with a market cap of $29.6 billion on total assets of $27.8 billion. In a recent TV interview co-founder, Chairman and CEO He Xiaopeng said profitability is still "a few years away."

What is unusual is that its book value as of mid-November was $49.46 which was below its recent trading price. Since its low of $17.11 in late September, the company has risen more than 160% as of mid-November. XPEV decisively broke out of its trading range above its top threshold line at $22.70 on November 4 on well above average volume. It continued to move higher after posting a bull flag in the mid-$30 range in what looks like stair-step action.

As we see in Figure 1, XPEV has performed similarly to competitors NIO Inc. and BYD Company Ltd which have also gained more than 100% since September.

And as we see in Figure 2, electric vehicle makers have been largely responsible for gains in the Auto Manufacturing industry chart (iX1170) since mid 2020.

Figure 2. Daily chart comparing some leading Chinese EV manufacturers with Auto Manufacturers (iX1170) showing the incredible gains experienced so far in 2020.

Graphic provided by: Freestockcharts.com.

In many ways, CEO He Xiaopeng has followed a similar path to Musk albeit a few years behind. In 2014 he sold his web browser, UCWeb Inc., to Alibaba for a figure close to $5 billion. He became convinced in the future of self-driving cars after an in-depth look at Tesla patents after Musk shared them that year — all while heading Alibaba's digital entertainment business according to an InsideEVs.com article (below).

It is always challenging buying a monster mover after it has experienced 100%+ gains in a month as volatility tends to be extreme. Whenever possible it's best to wait for a new base to form and another technical buy signal flashes before jumping in with both feet!

With any luck we might even see a pull-back in the mean time.

Matt Blackman

Matt Blackman is a full-time technical and financial writer and trader. He produces corporate and financial newsletters, and assists clients in getting published in the mainstream media. Matt has earned the Chartered Market Technician (CMT) designation. Follow Matt on Twitter at www.twitter.com/RatioTrade

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XPeng - Chinese EV Maker In Orbit?

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