Buy XPeng stocks, analyst says. It’s about VW.

Font size

The Chinese manufacturer of electric vehicles

XPeng

dropped a bomb on Wednesday, announcing a partnership with

Volkswagen
.

It was welcome news on Wall Street.

XPeng (ticker: XPEV) stocks have since received a number of upgrades. First, Macquarie analyst Erica Chen upgraded the stock to Hold from Sell on Thursday. On Friday, Jefferies analyst Johnson Wan upgraded XPeng to Buy from Hold. His price target for XPeng’s US-listed US certificates, or ADRs, went from $7.80 per share to $25.30.

Volkswagen (ticker: VOW3. Germany) is the reason. The German car company is investing USD 700 million in XPeng and is developing EVs together with its Chinese counterpart. The deal saw XPeng shares rise nearly 27% on Wednesday. Wan says the partnership will help make XPeng a global brand.

Volkswagen will also receive benefits. “VW’s Chinese domestic EV sales market shares fell from 3.5% in 2022 to 2.4% (in the first half),” Citi analyst Jeff Chung wrote in a Wednesday report. “It is necessary to seek a new strategy to prevent market share decline in China in the long run.”

XPeng’s ADRs rose another 6.8% in premarket trading on Friday.

S&P 500
And

Nasdaq composite
futures are up 0.4% and 0.8% respectively.

With the upgrade, 60% of analysts reviewing the company rate shares Buy. The average Buy rating ratio for stocks in the S&P 500 is about 55%. However, the average analyst price target is just $12.45 per share. XPeng ADRs were $21.52 in premarket trading. ADRs added about $7 this week.

In Friday trading, XPeng stock is down about 17% over the past 12 months. Declining deliveries amid industry growth have weighed on investor sentiment.

XPeng delivered about 41,000 vehicles in the first half of 2023, up from 69,000 in the first half of 2022. Total sales of electric batteries in China are up about 30% to about 2.5 million units so far.

Write to Al Root at allen.root@dowjones.com