XPEV Stock Alert: What to Know When XPeng is Downgraded

The electric vehicle (EV) market is very competitive, which could be problematic for XPeng (NYSE:XPEV). More recently, an analyst issued a competitive warning regarding this Chinese electric vehicle maker. Financial traders reacted quickly to the news; XPEV stock is down almost 4% at the time of this writing.

Specifically, Baird analyst Eunice Lee expressed concern that the company “will face increasing competition which could impact sales of the P7, G9, G3i and P5 models.” Undoubtedly, Lee is referring to rival EV makers like Nio (NYSE:NIO) And You’re here (NASDAQ:TSLA).

Reportedly, Lee cited “lower-than-expected volume” – referring to EV delivery volume, presumably – and the “erupting price war” in the industry as factors that “are expected to negatively impact on the margins”. As a result, the analyst downgraded XPEV’s shares from “outperforming” to “market performing”.

What’s going on with stock XPEV?

XPEV stock fell on the news, currently trading near the $9.50 level. Interestingly, this is below the $12 discount target that Baird assigned to the stock.

Does that mean Baird expects XPEV to gain in value over the next year? It’s possible, as analysts give XPeng “credit for its organizational restructuring and cost-cutting efforts.”

On the other hand, these efforts may be the company’s response to fourth-quarter results that fell short of Wall Street expectations. Additionally, Baird appears to believe that the electric vehicle maker’s restructuring may not have the desired effect “until the end of 2023 or 2024.”

The problem is that investors aren’t necessarily willing to wait as long as XPeng’s turnaround efforts yield results.

It will be interesting to see how this automaker executes its restructuring and how it chooses to deal with its bigger and more famous peers. Stocks have lost a lot of value over the past year. Plus, the competition from Tesla and others isn’t going to stop anytime soon. As a result, many XPEV stock traders today are heeding Lee’s concerns and selling stocks quickly.

As of the date of publication, David Moadel has not held (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.