Investment Overview
I know it’s pretty late, but I would start by wishing the Leo Finance community a very Happy New Year 2021.
The last few months have been exciting for cryptocurrencies as well as for equities. I would admit that equity markets look expensive at current levels. Some correction might be on the cards. However, I remain bullish on the medium to long-term outlook for the markets.
I would like to share some investment ideas for equities in the coming days. Ideas that are likely to deliver healthy returns in 2021.
My first equity investment idea for 2021 is XPeng. The company is listed on NYSE and currently trades at $45. I believe that XPeng stock can double in 2021.
This article will discuss the factors to be bullish on this Chinese electric vehicle company.
Bullish Triggers For XPeng Stock
An important point to note is that the electric vehicle industry has been on a high growth trajectory. This growth is likely to sustain not just for 2021, but for the next decade. Therefore, positive industry tailwind is the first reason to be bullish on XPeng.
In particular, China will remain the biggest EV market in the coming decades. XPeng is well positioned to benefit.
Coming to the factors to be bullish on XPeng stock, the company has continued to report stellar vehicle delivery numbers. For December 2020, the company reported vehicle delivery of 5,700, which was higher by 326% on a year-on-year basis.
Earlier, for Q3 2020, the company reported vehicle delivery of 8,578, which was higher by 265.8% on a year-on-year basis.
With China’s economy recovering, there is no reason to believe that vehicle deliveries will be slower in the coming year. As strong numbers flow in the coming months, I expect the stock to trend higher.
Further, XPeng has already started vehicle delivery in Norway. In 2021, the company plans to make further inroads in Europe. This is another trigger for top-line growth.
Another factor that can take the stock higher is improvement in margins. Gross margin for Q3 2020 was 4.6%. However, in Q3 2019, the company had reported negative gross margin of 10.1%.
In the coming quarters, I expect the company to be profitable at the operating level. This is another reason to be bullish on the stock. Further, as operating cash flows turn positive, the company will be internally funded.
Conclusion
XPeng is on a high growth trajectory and the company’s vehicle deliveries have continued to increase through 2020. I expect strong numbers to flow even in 2021.
This is likely to translate into top-line and margin growth. The stock looks attractive for gradual exposure. I will not be surprised if the stock is trading at $80 to $100 levels by December 2021.
