Finimize - 🚙 Xpeng is extra expensive

Xpeng brought in the billions | American businesses show some self-love |

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Today's big stories

  1. Chinese EV maker Xpeng reported better-than-expected quarterly results
  2. Our analyst has looked into how to respond to inflation, war, and rising interest rates all at once – Read Now
  3. US companies have announced a record amount of buybacks this year

Cautionary Tale

Cautionary Tale

What’s Going On Here?

Xpeng reported better-than-expected quarterly results on Monday, but there might be a malfunction under the Chinese EV maker’s hood…

What Does This Mean?

Xpeng made a loss last quarter, sure, but that’s not exactly the whole story. The EV maker actually delivered over 40,000 vehicles last quarter – more than three times as many as the same time the year before. Its cars were so popular, in fact, that it was able to hike its prices without turning customers off, which helped the company offset some of the extra supply chain-related costs. Xpeng even managed to top $1 billion in revenue for the first time – triple what it made at the same time in 2020. Still, it’s not resting on its laurels: the EV maker said it’s planning to deliver more than twice as many cars this quarter, and it’ll be ramping up production this year too.

Why Should I Care?

The bigger picture: Goodwill runs out. 
Xpeng still has one major problem to contend with: the price of lithium carbonate – a key ingredient in EV batteries – has jumped fivefold in the last year, and the war in Ukraine is bound to send its price higher still. EV makers like Xpeng, then, have just hiked their prices again to protect their profits – a move Morgan Stanley warns will hit demand sooner or later.

Zooming out: Tesla gets in on the stock split action.
Morgan Stanley’s less skeptical about Tesla, partly because the original EV maker has the heft to get the right suppliers on side. That might be why the investment bank is estimating that Tesla’s stock price will end up 30% higher than where it is now. It’s off to a good start: Tesla said on Monday that it’s planning to split its stock this year, and investors sent its shares up 5%.

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Analyst Take

How To Deal With All Of This, All At Once

How To Deal With All Of This, All At Once
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Reda, Analyst

What’s Going On Here?

This year has been a lot.

Just when we thought we were out of the frying pan of Covid, we’ve flopped gracelessly into the fire of another three predicaments.

The Russia-Ukraine conflict has caused a commodity supply shock that’s pushed their prices to new highs, with Europe in particular left reeling from the damage.

Inflation rates are at multi-decade highs across most of the world, leaving us with three possible outcomes: one bearish, one bullish, and one base case scenario.

And central banks – chief among them the Federal Reserve – are scrambling to engineer “soft landings” for their economies.

So that’s today’s Insight: how to adapt your portfolio to three diverse problems, all at once.

Read or listen to the Insight here

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Petty Cash

Petty Cash

What’s Going On Here?

Data out over the weekend showed US companies have announced a record amount of share buybacks this year, and they didn’t exactly have to break the bank…

What Does This Mean?

From supply bottlenecks to inflation, American companies are facing more than a few risks to their bottom lines. So they’re resorting to a well-worn trick to keep investors sweet: they’re buying back their own shares, limiting the supply available and pushing up the price of those left over. In fact, Goldman Sachs has shown that US companies have approved a record $319 billion worth of share buybacks this year – a far cry from the $267 billion of this time last year (tweet this). And now’s the perfect time for them to do just that: the average stock’s price in the US Russell 3000 index is down over 30% this year, which suggests companies can nab their shares for a bargain.

Why Should I Care?

The bigger picture: Bad luck, big banks.
America’s investment banks earn fees on facilitating major share buybacks, so this record-breaker might’ve come as a relief. Not least because they’ve seen a serious drop-off in one of their biggest money-spinners: advising companies on how to sell shares, usually through initial public offerings (IPO). Case in point: five of the biggest US investment banks have made nearly 90% less from that segment of their business this year than they had done this time in 2021.

Zooming out: The Middle East is thriving.
IPOs might be out of favor in the US, but they’re very much in vogue elsewhere: data out last week showed that Middle Eastern companies have raised more cash from IPOs than those in Europe this year. That’s probably because the region’s energy-heavy stock markets are having a particularly strong year, as the surging price of oil and natural gas sends local producers’ shares sky high.

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💬 Quote of the day

“The beginning is always today.”

– Mary Shelley (an English novelist)
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🎯 On Our Radar

  1. Off with its head. Apple’s has a new product, and all it took was some butchery.
  2. Spying can be a lot of fun. Thanks for the fun, Walgreens.
  3. Can’t get enough of sports? Now you can eat them too.
  4. Book your flights. This city’s growing a booming reggaeton scene.
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