XPEV - XPeng stock is downgraded at JPMorgan due to slowing growth pricing risk

JPMorgan warned on Wednesday that the reopening trade for the Chinese automobile sector is playing out rapidly and could run out of steam in the near term.

Analyst Nick Lai and team remain constructive on the new energy vehicle market this year, but forecast the growth rate will decelerate from around 80% last year to 20% in 2023.

While XPeng ( NYSE: XPEV ) should benefit from the rising trend in general, pricing competition in the mass segment is noted to be the fierce as evidenced by Tesla’s recent price cuts for both the Model 3 and Model Y.

JPMorgan revised down sales forecasts for XPeng ( XPEV ) due to the competitive pricing backdrop.

"We now project the company to deliver 28% volume growth this year to 155k units (vs previous 210k units), up from 121k units in 2022. On the margin front, considering Xpeng and most OEMs will absorb NEV subsidy shortfalls and share part of this burden with suppliers rather than passing it on to customers, the margin hit could be high, especially in 1Q23, before sequential improvement from 2Q23, driven by volume contribution from new models (e.g., upgraded version of P7 sedan and new B-segment SUV scheduled to launch in 2Q23)."

The new JPMorgan forecast shows XPEV revenue for 2022-2023 revenue forecasts about ~13% to 15% below the consensus marks and EPS losses about ~5% to 10% below consensus.

The firm dropped its rating on XPEV to Neutral from Overweight and cut its price target to $9 from $11.

Shares of XPeng ( XPEV ) fell 0.20% premarket to $10.07.

Read the latest breakdowns on XPEV from Seeking Alpha authors.

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