When the electric vehicle bubble ended last month, the drop created an excellent entry price for growth investors. EV demand continues to accelerate. In the sector, Nio (NYSE:NIO) and XPeng (NYSE:XPEV) have strong prospects. Those are the two to watch closely.
Nio posted a 149.3% growth in revenue in Q4 Y/Y, to $1.02 billion. Vehicle margins turned positive to 1.2%. It forecast Q1 deliveries of up to 20,500 vehicles. The 15-18% sequential growth in unit sales failed to fuel investor confidence. NIO stock is still down from recent highs.
Nio may rally sales by appealing to its customer base. The buzz will spread among the consumer base in China.
XPeng posted deliveries of 12,964 units in Q4. In Q1, it forecast a 450% growth in vehicle deliveries, to 12,500. Although the stock bounced back recently, the margin growth will not appear until the second half of the year. XPeng is increasing research and development efforts. It is also increasing its investments in marketing to drive sales. This higher cost will outpace revenue and lead to a loss again.
XPeng’s investments in its software will pay off. The voice-activated system and operating system are only getting better. Consumers will opt for the upgrade. The payments will increase the revenue per user, lifting margins.
XPEV and NIO stock have strong prospects for growth investors.