Daily Brief: Xpeng Delivered, But Its Results Didn’t

Daily Brief: Xpeng Delivered, But Its Results Didn’t

over 1 year ago3 mins

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Chinese EV maker Xpeng reported a worse-than-expected loss on Tuesday.

What does this mean?

Chinese lockdowns hampered Xpeng’s production last quarter, but it didn’t show in its results: the EV maker still managed to deliver over 34,000 cars, almost twice as many as it did at the same time last year. Layer in the price hike that Xpeng pulled off earlier this year, and its revenue doubled too. So it’s a shame the same can’t be said for its profits: the eye-watering cost of raw materials made short work of that mounting revenue, and sent the carmaker’s gross profit margins lower than the quarter before. That set the scene for a worse-than-expected quarterly loss of around $400 million, more than double Xpeng’s loss from the year before. And after it posted a disappointing forecast for deliveries this quarter, not even the promise of new model launches for budget-conscious customers could win investors over: they sent Xpeng’s stock down 10%.

Xpeng revenue

Why should I care?

The bigger picture: Priorities over profit.

Xpeng might’ve struggled last quarter, but Ford still has no doubt EVs are the way forward. The US carmaker has pledged to invest $50 billion into the space by 2026, and this week announced it’ll cut 3,000 jobs to help it raise some of that cash. That could be a risky move: most of those jobs will come from Ford’s traditional engine division, which the carmaker hopes will be the “profit and cash engine” for the rest of the company. But if that slims down too much, there might not be enough cash to go around.

Xpeng margin

Zooming out: Follow the leader.

Tesla’s still king of the electric jungle, but it might be dethroned soon: Hyundai – including its affiliate Kia – nabbed the second-top spot in the US by sales volume this year, and its prices and markets are starting to heavily resemble the OG’s. Analysts have seen this pattern before in a different industry: some say it’s similar to when Samsung overtook Apple in worldwide phone sales only two years after it launched its higher-priced smartphones.

Keep reading for our next story...

Zoom Is A Relic Of A Bygone Era

Zoom image

Zoom gave a disappointing quarterly results update earlier this week.

What does this mean?

Zoom’s peak-Covid glory days are well and truly behind it, with the teleconferencing service losing sales from individuals and small businesses even faster than it forecast. That’s increasingly pushed it to try and attract more enterprise customers, but even that segment – now responsible for more than half its revenue – had a humdrum quarter: the company added just 3% more enterprise clients from the quarter before, bringing the total to just over 200,000. So while overall revenue was 8% higher than the same time last year, it still represented the company’s slowest growth on record – not to mention the first time it’s ever missed analysts’ expectations.

Zoom revenue

Why should I care?

The bigger picture: Zoom versus Microsoft.

One of the ways Zoom tried to win over big businesses was with its June launch of “Zoom One” – a bundle that includes internet-connected phones and physical conference rooms. And while analysts are generally upbeat about those secondary offerings, they’re still worried Zoom can’t compete with the likes of Microsoft. The Zoom name, after all, doesn’t have quite the same clout with businesses as Microsoft’s does, while the latter’s ability to package Teams into Office 365 – used pretty much everywhere – gives it a clear advantage.

Zooming out: Zoom is only going one way.

Investors sent Zoom’s stock down 9% after the news, not least because the company cut its full-year outlook for both revenue and profit. That makes this the seventh of the last eight earnings reports where investors have sent its stock down afterward. Zoom’s stock is now worth half as much as it was at the end of last year, which Citi analysts think is just the beginning: they downgraded it to a “sell” rating last week.

Zoom stock
Source: The Wall Street Journal
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