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    An In-Depth Analysis For The Decline Of Xpeng Stock

    Image Source: Spyro the Dragon / Shutterstock

    In the premarket session on October 14, the share price of Chinese automaker Xpeng Inc (NYSE: XPEV) plummeted by 7.08%.

    Over the past six months, XPEV stock has surged by 65.69%, recovering much of its year-to-date (YTD) loss, which now sits at 15.03% at the time of writing.

    This downturn occurs amid a larger selloff in China, spurred by disappointing stimulus efforts that followed an ambitious announcement, which prompted investors to take long positions and propelled the CSI 300 index to its highest levels since 2008.

    The aftermath of this surge resulted in a correction, marking the index’s steepest decline since 1997.

    Xpeng stock declines amid widespread selloff

    At the time of reporting, many prominent U.S.-listed Chinese companies are experiencing significant declines in stock prices. Shares of Nio Inc (NYSE: NIO) have fallen by 3.93%, while Baidu (NASDAQ: BIDU) has dropped by 3.92%.

    There is currently no indication that XPEV is depreciating due to its own fundamentals; the movement seems to be solely a reflection of the ongoing market correction.

    In the second quarter of 2024, foreign investors withdrew a record $15 billion from Chinese markets. The initial stimulus measures, which included interest rate reductions and a $114 billion boost to the equity market, initially sent Chinese indices soaring, leading major institutions to invest quickly to avoid missing out on the potential gains.

    However, this strategy proved misguided—investors anticipated a continuation of these extraordinary measures, but the following announcements of vague and uninspiring actions, which did not prioritize financial markets, quickly dampened the enthusiasm.

    The bullish outlook for Xpeng

    The sharp market correction comes at a pivotal moment for the Chinese automaker. On the same day, Xpeng commenced presales for its P7+ model—the latest iteration of its flagship sedan, showcasing a range of AI-enhanced features.

    Under normal circumstances, this would have been a strong bullish signal—priced around $10,000 lower than Tesla’s (NASDAQ: TSLA) Model 3. Morgan Stanley noted this vehicle as a significant potential volume driver, while JPMorgan Chase recently increased its investment in Xpeng’s Hong Kong listing from 4.57% to 5.35% on October 8.

    It’s also noteworthy that Alibaba (NYSE: BABA) decreased its ownership in Xpeng from 10.2% to 7.5%, although the e-commerce giant clarified that this was merely a profit-taking action, not indicative of a shift in its long-term perspective.

    In its most recent earnings report, Xpeng shared positive developments—vehicle deliveries increased by 30.2% year-over-year (YoY), while revenues surged by 60.2% compared to the previous year.

    From the release of the earnings report on August 20 to the stimulus announcement on September 25, the stock actually climbed 54%.

    While current prices may seem inflated due to speculative activities, it is evident that Xpeng was on a positive trajectory prior to the significant downturn in the Chinese market.

    Additionally, the company recently published Q3 2024 vehicle delivery results, achieving a record of 21,352 units delivered in a single month. This market correction brings Xpeng’s valuation back to reasonable, sustainable levels, potentially offering a much more attractive investment opportunity for a company that appears to be heading in the right direction.

    Image Source: Spyro the Dragon / Shutterstock

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