Nearly a year after its first public offering, Chinese electric vehicle manufacturer XPeng (NYSE:XPEV) stocks, or XMotors as it’s known in the US, seems to have been a solid investment.
Source: Andy Feng / Shutterstock.com
Since the IPO in August 2020, the XPEV share has risen almost 100%. Investors who bought and held shares on their first day of trading cannot be disappointed with the returns generated so far.
In the past three months, XPeng’s stock is up 22%. With the electric vehicle market in China and the rest of the world expected to explode in the next decade, XPeng, headquartered in Silicon Valley and listed on the New York Stock Exchange, seems ready to take advantage.
Listing in Hong Kong
The current rally in XPEV stocks has been fueled in large part by XPeng’s upcoming double entry on the Hong Kong Stock Exchange in Asia. The company plans to offer 85 million shares when it starts trading in Hong Kong.
XPeng has said it plans to invest the proceeds from its Hong Kong IPO in the software and operating systems that power its electric vehicles. XPeng has said it hopes its listing in Hong Kong will bring in $2 billion and plans to use the proceeds to expand the number of charging stations and stores in mainland China.
XPeng’s Class A common stock is convertible with their American Depositary Shares (ADS) listed on the NYSE. When listed in Hong Kong, 95% of the shares go to institutional investors and 5% to private investors.
XPeng currently has a market cap of approximately $33 billion. In addition to electric vehicles, XPeng also develops technologies for autonomous driving. Within China, the company’s biggest competitors are: Tesla (NASDAQ:TSLA) and NIO (NYSE:NIO).
The stock began trading in Hong Kong on July 7 and was added to the FTSE Russell global stock index on July 8.
XPeng reported his highest monthly deliveries ever in June this year, with total electric vehicle deliveries of 6,565 units, an incredible 617% increase compared to June 2020 deliveries and 15% growth from May this year. Deliveries in June consisted of 4,730 P7 and 1,835 G3 electric vehicle models made by XPeng.
The June results pushed XPeng’s electric vehicle sales to a record second quarter, with 17,398 vehicles in the three months ended June 30, up 439% from the second quarter of 2020, as the pandemic hit sales hurt.
As of June 30, XPeng’s total shipments for the first half of this year totaled 30,738 vehicles, up 459% from the first six months of last year. The stronger-than-expected sales in the first half of this year are particularly impressive as they global shortage of semiconductor chips that has prompted more established automakers to cut production and revise their sales forecasts for this year.
Buy XPEV Shares
All Chinese stocks carry some risk. Regulations in China are less developed than in the US and fraud continues to be rampant in the country’s capital markets. In addition, Chinese authorities have a habit of attacking their most successful companies and to break down on them in ways that harm their business and the stock price. Look what happened to Alibaba (NASDAQ:BABA) and Didi Global (NYSE:DIDI).
Despite the risks, XPEV stock is worth investors’ money. To date, the company has managed to keep the favor of the Chinese government and investors. Strong sales and a dual stock listing in Hong Kong have helped the stock price on the rise again.
And this is after the company’s stock price nearly doubled in less than 12 months. The fact that XPeng is headquartered in California and has a strong presence in the US also helps differentiate the company from a slew of other Chinese electric vehicle start-ups.
Evaluated in the current context, XPeng stock is a buy.
At the date of publication, Joel Baglole had no (direct or indirect) positions in the securities referred to in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publication Guidelines.
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