Deutsche Bank believes shares of electric-vehicle maker Xpeng are a Buy, but not due to rising EV sales in China. Rather, it’s for the company’s advancing autonomous vehicle, or AV, technology.
A quick peek at the performance of EV stocks for the past year indicates just how momentous an endorsement by Yu really is. Auto market goliath Tesla has seen its stock jump 640% in the past year, while shares of Chinese EV maker NIO have gone apeshit, tacking on more than 1000%.
The analyst added XPeng stock [$XPEV] to his “catalyst buy” list Thursday because of the company’s investments in self-driving capabilities. Deutsche [$DB] uses the “catalyst buy” call when its analysts think a stock will pop soon. XPeng stock is already up a cool 164% since November, but Yu predicts the stock will keep rising “following positive media and investor feedback from the test drives of XPeng’s new level-three functionality.”
Level three is in the middle of the five levels of autonomous driving. Level zero is no driver-assistance technology at all. Level five means drivers don’t have to do anything and a human driver isn’t needed. Level three is “conditional autonomy”: The driver isn’t required to monitor the driving environment, but needs to be ready to take back control of the vehicle at any time.
XPeng recently announced details concerning its “Navigation Guided Pilot,” which will be part of the driver-assistance feature package the company dubbed XPILOT 3.0. What’s more, Yu believes XPILOT 3.0 will be known as the best autonomous-driving feature available. The system “has been tuned to work in adverse weather conditions, complex roads, and without GPS signal,” Yu added.
The analyst is bullish over the long term as well, notching Xpeng shares at a Buy with a $58 price target. Other automakers are increasingly chatting about AV, too, due in large part because of the success of automakers such as XPeng in the market. Consumers are starting to associate AV functionality with the top auto brands.
On Tuesday, General Motors’ [$GM] Cruise autonomous driving company took in a $2 billion investment from Microsoft [$MSFT]. XPeng peer NIO [$NIO] also reviewed its autonomous-driving technology at the company’s fourth annual NIO day earlier in January. And Tesla [$TSLA] is testing a beta version of its full self-driving software this past year, as it seems like high levels of autonomous-driving technologies are hitting roads—not just being talked about in boardrooms.
Investors have more angles to play the AV trend, too. There are new laser-based radar, or lidar, stocks—including Veoneer [$VNE] and Luminar Technologies [$LAZR]. Lidar sensors are used by many automakers to facilitate autonomous driving. And other companies, such as Aptiv [$APTV], incorporate all the sensors and link them to a car’s central processing center.