This year has been a tough ride for electric vehicle (EV) companies, particularly those based in China. Xpeng (XPEV) stock has plunged by 46% in 2024, hovering close to its all-time lows. Meanwhile, Li Auto (LI) and NIO (NIO) have also taken a hit amidst the meltdown in Chinese EV stocks.

The Struggles Faced by Xpeng Stock

The decline in Xpeng stock can be attributed to the broader sell-off in EV stocks. Even Tesla (TSLA), a prominent player, is carrying the unenviable title of being the worst-performing S&P 500 Index stock in 2024. The devaluation of Chinese stocks due to the country’s economic slowdown and strained relations with the Western world has further exacerbated challenges, creating a double blow for Chinese EV stocks.

With the disappointing Q1 delivery volumes of Chinese EV companies and Xpeng’s own struggles in February, sentiments have soured. While March saw a slight uptick with 9,026 deliveries, the numbers remain below the 10,000 mark for the third consecutive month. Moreover, Alibaba (BABA) gradually shedding Xpeng shares has not aided market sentiment.

This year was anticipated to be monumental for Xpeng, but a rocky start to the first quarter reflects in its stock price. Nevertheless, XPEV emerges as an enticing EV stock option in April, despite the prevalent short-term industry challenges.

Positive Signs in XPEV’s Financial Performance

Amidst gloomy delivery reports, there are glimmers of hope in Xpeng’s financials. The company finally achieved a gross profit in Q4 2023, following two quarters of negative margins. Additionally, 2023 marked the first time Xpeng reported positive annual operating cash flows and subsequently positive free cash flows in the latter half of the year.

Turning cash flow positive marked a significant milestone for Xpeng, given the industry norm of substantial cash burn that has led many startups to bankruptcy. Xpeng is gearing up to unveil a range of new models, including collaborations with major players like Volkswagen (VWAGY) and Didi, while also expanding key partnerships to streamline operations and reduce costs.

Reasons to Consider XPEV as a No-Brainer Stock

Despite the ongoing turmoil in the EV sector, XPEV stands out as an appealing choice post the recent downturn. Several factors contribute to this sentiment:

• Xpeng anticipates a rebound in deliveries in the latter part of the year as it launches new models and capitalizes on partnerships.
• CEO Xiaopeng He’s outlook during the Q4 earnings call highlighted potential revenue streams from platform and software services, projected to enhance gross margins by 2024. The company aims for profitability in 2025, although analysts remain cautious, predicting a loss that year.

• With $6.44 billion in cash, cash equivalents, and investments by the end of 2023, and minimal long-term debt of around $800 million, Xpeng boasts a robust balance sheet that can weather the current EV industry slowdown better than its financially strained peers.
• Moreover, XPEV’s next 12-month enterprise value-to-EBITDA multiple of 0.53x is notably lower than rivals like Rivian and Tesla, offering a compelling valuation proposition. This places Xpeng at a discount compared to other EV players like NIO and Li Auto.

Summing it up, Xpeng emerges as a promising stock pick this month, flaunting attractive valuations, key partnerships, a strong product lineup, and a promising growth trajectory. Despite the prevailing challenges in the EV landscape, XPEV shines as a beacon of potential for investors.