UBS Downgrades Xpeng Inc to 'Sell'

UBS downgraded Xpeng Inc (NYSE:XPEV) from “neutral” to “sell” on Friday, highlighting that the stock's recent rally appears overextended and that downside risks are not fully factored into its current valuation.

Price Target

The analysts raised the price target from $8.20 to $8.80, which remains over 30% below the current trading level.

Promising Momentum

Despite XPeng's promising momentum from new models and cost optimizations, UBS believes that these advantages are already reflected in the stock price. They caution that unaddressed downside risks include valuation concerns, dependency on subsidies, and execution of extended-range electric vehicles (EREVs).

XPeng's stock has risen more than 50% since September, primarily driven by robust order intake and delivery figures for the newly launched MONA M03 and P7+ models, surpassing market expectations.

Market Factors

UBS highlights competitive pricing and improved vehicle features, alongside attractive scrappage subsidies in China, as reasons behind the increasing demand for these lower-priced EVs.

According to CPCA data, the average vehicle prices in China fell to RMB168k in October, down from RMB186k in H1 2024, with scrappage subsidies boosting entry-level model sales.

Valuation Comparison

Currently, XPeng is trading at 1.5x the 2025 estimated price-to-sales (P/S) ratio, notably higher than its competitors, such as Nio (0.9x) and Li Auto (0.7x).

Analysts conclude that while there is excitement for XPeng's new EV strategies and cost optimisation, they believe that the potential for upside is largely reflected in the current stock price, advising investors to be wary of unrecognized risks.