Here’s why you might want to consider investing in XPeng

There’s no denying the two most significant trends today in tech stocks like Nvidia Corp. NASDAQ:NVDA and electric vehicle stocks such as Tesla Inc. NASDAQ:TSLA. However, the trend has not reached all stocks in the sector equally.

Only a few investors, including Michael Burry and Ray Dalio, have dared to venture into Chinese stocks.

Since it has grown its earnings per share (EPS) twice as fast as Tesla, trading at a huge discount, consider putting XPeng Inc. New York Stock Exchange: XPEV on your checklist.

Will the Chinese consumer be able to return?

Most called Chinese stocks “uninvestable,” while others still have high hopes for an economic recovery. An undeniable trend in China’s economy will create a potential slingshot for stock prices in the coming months.

The CSI 300 (China’s S&P 500) recently fell to five-year lows, sending the dividend yield on that index soaring to 5.5%. At the same time, Chinese 10-year bonds pay only a 2.5% yield, which is the most significant difference since 2005, and the closing of this gap has led to a massive stock rally.

China’s inflation rates have recently turned higher than expected, further strengthening the bullish case for increased consumer activity. XPeng is now in the eye of the storm to see aggressive sales expansion.

XPeng takes the spotlight

Analysts believe XPeng could grow its EPS by up to 57% over the next 12 months, above the 13% expected for the overall auto industry. Of course, this far exceeds Tesla’s 40% projection for this year.

Since XPeng has yet to make a net profit, basing your investment thesis on EPS growth can be tricky.

Here’s a better way: rely on sales growth and price-to-sales (P/S) ratios. Analysts believe XPeng’s sales will rise from $4.4 billion to $7.9 billion, an increase of 80%.

At the same time, Tesla analysts believe sales will rise from $109.4 billion to $132 billion, a much smaller 20% increase.

XPeng shares trade for a P/S of 2.5x, which is a 58% discount to Tesla’s 6x ratio.

Wall Street appreciates the drop

As it trades at just 42% of its 52-week high price, XPeng stock represents an attractive drop.

His competitor, Nio Inc. NYSE: NIO, it trades much worse than its 52-week high by 34% and has underperformed XPeng shares by as much as 14% over the past month. Price action favors XPeng as the wave of Chinese consumption is expected to hit the market soon.

XPeng’s decline became so obvious that some on Wall Street couldn’t resist it. Analysts at Bank of America Inc. NYSE:BAC raised XPeng’s stock price to $22 per share; the stock would need a 123% rally to prove they were right.

Come tie everything with a bow Northern Trust Co. NASDAQ:NTRS; this group bought up to $25,000 in February 2024, a 2.2% addition to their stock position.

XPeng will release its quarterly earnings this week, on the back of an evolving Chinese economy. The odds may be in your favor for a rally on an earnings beat.

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