It’s been a pretty rough day for most stocks in the market, with all three major indices lower this afternoon. Contributing to today’s decline is XPeng (NYSE:XPEV), which is down a little more than 2% ahead of the company’s earnings scheduled for tomorrow. Investors will be watching how XPEV stock performs in the coming days, as market sentiment appears to be relatively muted for this Chinese electric vehicle (EV) maker ahead of a significant earnings report.
Generally speaking, many investors and analysts appear to be bearish around XPeng’s expected revenue for the past quarter. Much of this has to do with an ongoing price war in the EV sector, led by Tesla (NASDAQ:TSLA). Other EV makers have followed suit, resulting in a race to the bottom, signaling margins may be on the decline. While great for consumers, it’s unclear how this ongoing price war will impact XPeng’s top and bottom lines.
Tomorrow is also the launch day for Nio’s (NYSE:NIO) ES6 electric SUV. If Nio can generate significant orders, this could give investors a reason to invest in Nio over XPeng, at least in the near term.
Let’s dive more into what investors should be watching in the Chinese EV space.
XPEV Stock Dips Ahead of Crucial Earnings Report
XPeng’s upcoming earnings report should provide investors with some decent color on the health of the Chinese EV market. In many respects, XPeng and Nio are among China’s top pure-play EV options, meaning how they performed over the past quarter could be emblematic of their future performance throughout the year.
The reopening of the Chinese economy will certainly have provided a boost when analysts compare year-over-year numbers. However, all eyes will likely be on margins and bottom line earnings (for XPeng, likely losses). If the company’s quarterly loss exceeds the expected 33-cent loss analysts have penciled in, this stock could see a significant downside.
It should be noted that XPeng has seen two downgrades ahead of its earnings, with expectations that revenue will come in weaker than expected, thus hampering this stock. Of course, many investors may be looking to pick up shares ahead of this report. That’s because if there’s a surprise beat, XPEV stock can potentially fly.
In my view, XPeng will be the stock to watch tomorrow. Investors should buckle up for what could be a volatile day for the EV maker.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
