Xpeng Motors (NYSE: XPEX) stock is trading sharply higher in US premarket price action today despite missing consensus earnings estimates for the third quarter of 2022. The company talked about cost cuts and a strategy review, which seems to strike the right chord with investors
Xpeng Motors reported revenues of $960.9 million in the third quarter of 2022. The revenues rose 19.3% YoY but trailed analysts’ estimates. It delivered 29,750 cars in the third quarter of 2022 which was 15% higher than the corresponding quarter last year. However, the company’s production and deliveries have plummeted after peaking in June.
In June, Xpeng Motors delivered 15,295 cars, a near record for the Chinese EV company. However, in October, its deliveries fell to a mere 5,101 cars which were half of what it did in the same month in 2021.
In the first 10 months of 2022, Xpeng delivered 103,654 cars which is 56% higher than the corresponding quarter last year. The company’s cumulative deliveries reached 241,607 at the end of October.
While releasing the Q3 2022 earnings, Xpeng Motors forecasted deliveries of between 20,000-21,000 cars in the fourth quarter, which is roughly half of what it did in the fourth quarter of 2021.
Xpeng Motors Reported a Rise in Losses in Q3
Xpeng Motors reported a net loss of around $330 million in the third quarter of 2022. While losses narrowed slightly from the previous quarter, they were significantly higher than in the third quarter of 2021. Its gross margin also fell by 90 basis points YoY to 13.5%. It ended the quarter with cash and cash equivalents of $5.64 billion.
NIO also reported a squeeze on its gross margins in the third quarter of 2022 amid high inflation and the metric stood at 13.3%. It posted an adjusted per-share loss of 30 cents in the third quarter of 2022, which was wider than the 6 cents per share loss that it posted in the corresponding quarter last year.
NIO has partnered with Chinese tech giant Tencent for self-driving cars. In September, Xpeng Motors, which has partnered with Alibaba for self-driving cars, debuted a semi-autonomous driving system in China and launched the pilot program of its Navigation Guided Pilot (City NGP). The pilot program was available for a select group of Xpeng P5 customers in Guangzhou.
NIO stock has crashed this year amid the sell-off in Chinese EV stocks. However, earlier this month, Deutsche Bank said that the worst looks over for the company and reiterated its bullish call on the company. There is a guide on how beginners can buy NIO stock.
Xpeng Motors is Looking to Cut Costs and has Completed a Strategic Review
Taking of XPEV’s Q3 2022 earnings, in his prepared remarks, Xpeng Motors CEO He Xiaopeng said, “Our management team has recently conducted an in-depth review of our growth strategy, products and operation.”
He added, “We have already carried out organization restructuring and changed some of our strategies. I am confident that our industry-leading smart and electrification technologies will allow us to build competitive products appealing to a broad customer base.”
Notably, amid perennial losses and cash burn, startup growth companies are under pressure to lower their cost base. Even tech giants like Amazon, Alphabet, and Meta Platforms have taken multiple measures to control costs.
Xpeng Motors is also looking to lower costs. Hongdi Brian Gu, XPEV’s President said, “We will implement prudent cost control initiatives and improve operational efficiency.” He added, “As we plan a number of upcoming product and technology rollouts, we are confident that we can achieve significant improvement in both sales volumes and average selling price.”
There Has Been a Crash in EV Stocks This Year
There has been a crash in EV stocks this year and Xpeng Motors stock is down over 85% for the year. Tesla has also lost around $500 billion in market cap over the last two months. Along with the sell-off in EV names, Elon Musk’s Twitter acquisition is also putting pressure on Tesla stock.
Meanwhile, Morgan Stanley analyst Adam Jonas continues to remain bullish on TSLA stock and believes that there would be a good buying opportunity near his bear case target price of $150. We have a guide on how to buy Tesla stock.
Wall Street Analysts Are Turning Bearish on XPEV Stock
Coming back to Xpeng Motors, analysts have turned cautious about the stock over the last few weeks. Citi double-downgraded the stock from a buy to a sell. There are concerns over the health of the Chinese EV industry amid the deteriorating economy.
Earlier this week, Jefferies also downgraded Xpeng Motors stock to underperform and lowered its target price to a mere $4.2. Xpeng Motors is meanwhile defying the pessimism today and is up sharply despite missing on both the topline and the bottomline.
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