How High Can This Growth Stock Go After Doubling in 2025?
Meanwhile, while U.S. stocks have whipsawed and look vulnerable, their counterparts in China are having a good run. Specifically, Chinese electric vehicle (EV) company Xpeng Motors (XPEV) has nearly doubled in 2025. In this article, we'll examine whether the stock can continue its rally from these levels.
Why Has Xpeng Motors' Stock Rallied?
Chinese stocks have been the flavor of the season this year amid renewed interest from global investors. China has set a GDP growth target of 'around 5%' for 2025 and recently announced a plan to boost consumption. Moreover, the artificial intelligence (AI) euphoria that propelled U.S. stocks higher in 2023 and 2024 has moved to China ever since DeepSeek revealed that its AI model performed better than AI models from Meta Platforms (META) and OpenAI… and at a lower development cost.
But then, Xpeng Motors' rally hasn't been all about the macroeconomy, as it is outperforming its Chinese EV peers by a wide margin in 2025. The company has impressed with its performance and its deliveries topped emerging Chinese EV companies in the first two months of the year. It also outsold Li Auto (LI), which at its peak last year was selling more vehicles in a month than Nio (NIO) and Xpeng Motors combined.
Xpeng Motors has also benefited from the AI rally in China as the company has some of the most advanced autonomous driving technology in the country. It is hopeful of achieving L3 autonomy later this year and L4 – or fully autonomous driving – in 'low-speed scenarios' next year.
Xpeng Motors is perhaps the most ambitious emerging new energy vehicle (NEV) company in China. It aims to mass-produce humanoid robots and flying cars by 2026. Investors have grabbed the stock to bet on China's AI pivot.
How High Can Xpeng Motors Stock Go?
After Xpeng Motors' Q4 earnings release, JPMorgan slashed its target price to $31 which is just over 30% higher than the March 19 closing price and is the Street-high target price for the Chinese EV company. Xpeng Motors has a consensus rating of 'Moderate Buy' from analysts and it currently trades above its mean target price.
Sell-side analysts have been mixed on XPEV this year, and while UBS, Citi, and Nomura have upgraded the stock by one notch, Macquarie and Daiwa have downgraded the stock. Macquarie incidentally flipped-flopped on Li Auto and downgraded it earlier this month after having previously upgraded it to an 'Outperform' in February.
Why the Best Is Not Yet Over for Xpeng Motors
While there could be some profit taking in Xpeng Motors shares after the recent rally, I believe the best is yet to come for the company. Looking at the short to medium term, Xpeng Motors expects its deliveries to double this year which would imply shipments in the range of 380,000 in 2025.
The company is looking to launch new or updated versions every quarter beginning in 2025 and these new models – spread across various price points – will help increase the company's target market. Upgrades to autonomous driving software will also help propel Xpeng Motors' sales and would act as a differentiator by widening its superiority over peers.
Xpeng Motors' Long-Term Forecast
During the Q4 2024 earnings call, Xpeng Motors listed three growth pillars for the long term. These are:
AI-powered vehicles: Xpeng Motors has developed its custom Turing chip, with mass production expected in 2026. The company listed progress in AI-powered cars as a key long-term strategic growth driver.
International expansion: Last year, Xpeng Motors sold 20,000 cars in global markets and expects the volumes to double in 2025. The company sees international expansion as a key driver, and while Chinese EVs face stiff tariffs in the U.S., Canada, and the EU, Chinese automakers have been expanding elsewhere.
Humanoids: Xpeng Motors is also developing humanoid robots which will be another key long-term driver.
To be sure, the growth drivers for Xpeng Motors don't look much different from those of Tesla (TSLA), which is also betting on autonomous driving and robotaxis in the short term while banking on humanoid robots and other AI products in the long term. However, Tesla's growth story appears to have stalled as its vehicle sales have been tepid, at least in part due to CEO Elon Musk's political activities.
Xpeng Motors' vehicle margins have improved for six consecutive quarters and the company generated free cash flows of around $275 million in the back half of 2024, ending the year with cash and cash equivalents of $5.75 billion. The company has forecast profitability in the final quarter of the year led by cost cuts and economies of scale. From a valuation perspective, XPEV trades at a forward enterprise value-sales multiple of 1.86x, which is twice that of Nio and over thrice of Li Auto.
However, I believe that given Xpeng Motors' growth trajectory for 2025 and its position as a prominent AI play, the stock can command a premium. While there could be some short-term weakness in XPEV stock, I believe the company's long-term growth looks firmly on track as it strives to become the 'Tesla of China' – a title that was previously associated with Nio.
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