VLKAF - XPeng's cash burn and delivery outlook to be in focus during Q2 earnings

2023-08-17 13:43:03 ET

XPeng ( NYSE: XPEV ) is set to report its second quarter results on Friday and investors will assess how the Chinese electric-vehicle maker is managing its cash burn, while keeping an eye on details regarding its future delivery numbers.

Wall Street expects XPeng to post loss per share of $0.34, while revenue is expected to decline 36.4% to $706.28 million.

Investors have been concerned over EV makers’ dwindling cash reserves to ramp up production in the face of a tight funding environment, weak economy and increased competition from market leader Tesla ( TSLA ) as well as local players.

Guangzhou- based XPeng, which saw sales decline more than 40% during its first quarter, said its cash and cash equivalent stood at 34.12 billion yuan as of March 31, compared to 41.71 billion yuan, a year earlier.

Although, investors are not expecting profitability any time soon, the recent partnership between Volkswagen ( OTCPK:VLKAF ) and XPeng, with the former is making a $700 million investment for a 4.99% stake in XPeng, stoked optimism with the stock gaining near 27% on that day.

In connection with the strategic technical collaboration, XPeng ( XPEV ) and Volkswagen will jointly develop two B-class battery electric vehicles models, aiming to take market share in China. The company will likely discuss more on the partnership during its earnings call.

While most analysts are hopeful on the collaboration, saying that it is a positive development for XPeng since it has suffered “from a deterioration in investor confidence” and that XPeng could leverage the partnership to enter the European market, some are still skeptical.

UBS analyst Paul Gong said that the upside from the Volkswagen partnership and G6 momentum is already factored into the share price.

XPeng posted 28% month-over-month rise in July delivery and said its recently launched G6 deliveries reached more than 3,900 units.

"While the VW collaboration will proceed over the next three years, the company remains vulnerable in a fiercely competitive market and needs to recover its profitability," warned Gong.

Over the last two years, XPeng has beaten EPS estimates 50% of the time and has beaten revenue estimates 63% of the time.

Seeking Alpha and Seeking Alpha’s Quant Rating consider the stock a “hold”, while Wall Street rates the stock a “buy”. The stock has risen nearly 58% so far this year.

Over the last three months, EPS and revenue estimates have seen no upward revisions, compared to two and five downward moves respectively.

More on Xpeng

• NIO And XPeng: Attracting High-Profile Strategic Investors
• XPeng: Don't Pay More Than Volkswagen Did (Rating Downgrade)
• XPeng: Volkswagen Partnership Is A Game Changer (Rating Upgrade)
• XPeng falls for third straight day after autonomous driving exec resigns

For further details see: