Tesla vs. XPeng: Which Stock is a Better Buy?

NASDAQ: TSLA | Tesla, Inc. News, Ratings, and Charts

TSLA – Tesla (TSLA) has dominated the EV market in the past couple of years, but is currently facing competition from emerging EV companies across the globe. XPeng (XPEV), which went public in August, has been making waves in the smart EV market, with bolstering financials and expansion projects. Which of these stocks is a better buy now? Let’s take a look.

Tesla, Inc. (TSLA - Get Rating) revolutionized the electric car industry through its top-of-the-line products that have higher efficiency and durability. It is one of the stocks that easily dodged the market volatility amid the pandemic, to reach record highs. XPeng, Inc. (XPEV - Get Rating), on the other hand, is a Chinese EV designer and manufacturer. Operating in the largest automobile market in the world (both in terms of demand and supply), XPEV has emerged as one of the leading manufacturers of electric vehicles, giving stiff competition to the US-based organizations.

Though XPEV is a relatively new company, which went public in August this year, its robust exports and price advantage gives it an upper hand in the current market. XPEV gained 9.3% over the past month while TSLA declined marginally. But which stock is the better buy now? Let’s find out.

Latest Developments

TSLA has been deemed one of the best performing stocks during the pandemic, with a 425.1% gain year-to-date. Its record high share prices led to the announcement of a 5-for-1 stock split on August 11th. The company reported profits for four consecutive quarters, following which analysts and investors speculated on its potential inclusion in the S&P Dow Jones Indices. However, TSLA did not make the cut, leading to a huge sell-off.

TSLA’s Model S was tested to be the safest car ever by National Highway Traffic Administration upon launch. TSLA is currently planning to launch three new electric vehicles in the near future, including a Tesla Cybertruck and 2 electric cars. It is currently planning to expand to Indonesia to ensure a steady supply of nickel, a key component in manufacturing car batteries.

TSLA is reportedly planning to launch its product in India in 2021. With a huge population and thereby market base, this expansion is expected to ramp up the profits for the company.

CleanSpark, a software and services company, recently partnered with TSLA to use its batteries for a Microgrid project in South America. TSLA is currently planning to expand to Indonesia to ensure a steady supply of nickel, a key component in manufacturing car batteries.

XPEV raised $1.5 billion through its listing on the NYSE, in August this year. Alibaba Group Holdings Ltd. (BABA - Get Rating) had a 19% stake in XPEV as of August 26th. XPEV’s class A American Depositary Shares were included in the MSCI China All Shares Indexes and MSCI Global Standard Indexes, effective September 11th.

XPEV’s wholly owned subsidiary Guangdong Xiaopeng Motors Technology Co., Ltd. signed an agreement with Guangzhou GET Investment Holdings Co., Ltd. for developing a smart EV manufacturing base in Guangzhou.

Recent Financial Results

TSLA’s EV deliveries increased 7% year-over-year (subject to operating lease accounting) in the third quarter that ended September 2020.

XPEV delivered 8,578 vehicles in the third quarter that ended September 2020, indicating a 266% improvement year-over-year. It delivered a record of 3,478 smart EVs in September, up 145% from the same period last year, and 31% from the prior month value.

Thus, EPEV has an edge over TSLA here.

Past and Expected Financial Performance

TSLA’s revenue and EBITDA grew 3.1% and 46.8% year-over-year. Analysts expect TSLA’s EPS and revenue to grow 86.9% and 39.8%, respectively, next year.

XPEV’s revenue increased 23,815.3% year-over-year, while its EBITDA rose 123% over this period. Analysts expect the company’s EPS and revenue to rise 44.8% and 172.9% next year.

Thus, XPEV is in an advantageous position here as well.

Valuation

In terms of trailing 12-month price/sales, TSLA is currently trading at 15.52x, 18.6% more expensive than XPEV, which is currently trading at 13.09x. However, XPEV is more expensive than TSLA in terms of trailing 12-month EV/sales ratio (57.12x versus 16.26x).

The Winner

TSLA being a dominant player in the market with solid financial growth over the last couple of years might be a safe choice. However, its growth potential is lower compared to XPEV. XPEV has delivered triple digit gains year-over-year, despite going public in August. It is currently branching out to European markets as well, as it sent its first shipment of smart EVs to Norway, for sale in the Scandinavian countries. XPEV’s expansion plans, favorable analyst sentiment and accelerating demand and thereby sales are expected to drive the stock to record highs in the upcoming months, making it the better buy now.

Want More Great Investing Ideas?

Top 11 Picks for Today’s Market

7 Best ETFs for the NEXT Bull Market

5 WINNING Stocks Chart Patterns


TSLA shares were trading at $432.90 per share on Monday afternoon, down $6.77 (-1.54%). Year-to-date, TSLA has gained 417.41%, versus a 7.99% rise in the benchmark S&P 500 index during the same period.


About the Author: Aditi Ganguly


Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
TSLAGet RatingGet RatingGet Rating
XPEVGet RatingGet RatingGet Rating
BABAGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Stock Market Update: It’s Complicated!

The S&P 500 (SPY) may have bounced 17% from recent lows, but the outlook for stocks from here is...in a word...COMPLICATED. Read on to get Steve Reitmeister full market outlook and trading plan for this complicated market environment.

Becoming More Bullish on Stocks, But...

Stocks are on a roll with the S&P 500 (SPY) up more than 10% from the recent lows. Before you start getting too giddy, you should read this updated market outlook and trading plan Steve Reitmeister.

Stock Market Held Hostage

Uncertainty is the term most often applied to this stock market. Uncertainty over tariffs. Uncertainty of whether the S&P 500 (SPY) will fall into bear territory. Uncertainty over what happens next. Steve Reitmeister dives into the uncertainty to make sense of the market in this week’s commentary...

Stock Market Standing on the 50 Yard Line

Steve Reitmeister contemplates where the stock market stands now and what happens next in trying to stay on the right side of the market action. One path points to bear and one to new highs for the S&P 500 (SPY). Which will it be?

Bear or Bull Market?

The S&P 500 is on the brink of bear market territory...but that outcome is not a given at this time. Steve Reitmeister shares insights gleaned from his 45 years of investing to shine a light on current conditions along with his top picks...

Read More Stories

More Tesla, Inc. (TSLA) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All TSLA News