Barclays downgrades Xpeng (XPEV) following disappointing 1Q miss

Barclays downgraded XPeng Inc. (NYSE: XPEV) to an Underweight rating and cut their 12-month price target on the stock to $6.00 (From $8.00) following the electric automaker’s disappointing 1Q earnings results.

Xpeng reported total revenue of RMB 4.0bn, -45.9% yoy, -2.1% lower than Barclay’s estimate. Vehicle sales were RMB 3.5bbn, -49.8% yoy, -4.1% lower than expected due to lower-than-expected vehicle deliveries and to a much smaller extent the expiry of NEV subsidies.

The automaker reported an adjusted operating loss of RMB 2.5bn for the quarter. The loss was -2.4% wider than expected mainly due to a worse-than expected gross margin. Adjusted net loss was RMB 2.2bn, -2.7% higher than Barclay’s estimate.

Analyst Jiong Shao wrote in a note, “With disappointing sales of its latest model, the G9, which launched in September 2022, XP reported weaker-than-expected Q1 results and provided a weaker-than-expected Q2 guide. In Q1, as the company heavily promoted sales of older models, the gross margin of vehicles was negative (-2.3%) for the first time since 2Q20, while opex remained elevated. Management commented that gross margins were expected to remain under pressure in Q2 and only gradually recover in 2H. Another key challenge for startup EV makers is that no matter what the sales level of their products is, they need to invest aggressively if they aspire to be one of the players left standing after the inevitable industry consolidation. Now all eyes are on the G6, to be released in late June. Given the recent challenges and uncertain fate of the G6, it is prudent for us to move our rating to Underweight.”

Xpeng guided to 2Q23 deliveries of 21k-22k, -38% yoy at the midpoint, and total revenue of RMB 4.5 to 4.7bn.

Shares of XPEV are down 8.44% in morning trading on Thursday.

By Michael Elkins | [email protected]

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