Xpeng Inc – ADR XPEV shares, which retreated last week on the back of an equity offering, are moving to the upside following the initiation of coverage by Deutsche Bank.
The Xpeng Analyst: Edison Yu initiated coverage of Xpeng's stock with a Buy rating and $58 price target.
The Xpeng Thesis: Xpeng is well positioned to take market share in the mid-tier and lower premium market, Yu said in a Monday note. Xpeng is one of the "Fab Four'"named by Deutsche Bank, along with Nio Inc – ADR NIO, Li Auto Inc. LI and WM Motor.
These automakers, along with Tesla Inc TSLA, are increasingly destined to conquer the Chinese auto market, Yu said. There are likely to be multiple winners in the new EV world order.
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Xpeng is positioning itself as the technology leader of the pack, given its focus on internally developing a full software stock and willingness to quickly roll out new features, the analyst said.
The company's software capabilities, the analyst said, are most evident XPILOT, its autonomous driver assistance system, and cockpit/infotainment which is expected to resonate well with younger tech savvy consumers. The company is also planning to use LIDAR on mainstream production vehicles.
"Moreover, we could ultimately envision XPeng launching a subscription service for its XPILOT ADAS/AD feature set, potentially generating software sales of 1.8bn/4.2bn RMB by 2025/30E," Yu wrote in the note.
Despite lagging behind Nio in brand awareness, Yu said Xpeng's P7, a sport sedan similar to Tesla's Model 3, has redefined consumer perception and will sell very well.
The firm expects XPeng's volumes to grow more than 110% year-over-year to 53,500 units in 2021 and eventually to 300,000 by 2025, representing about 6% of BEV market share.
XPEV Price Action: Xpeng shares were rising 4.7% to $46.41
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