Xiaomi: Hold Rating Amid Margin Pressures, Low-End Vulnerability, and Competitive Challenges

Jefferies analyst Edison Lee downgraded the rating on Xiaomi to a Hold today, setting a price target of HK$43.36.

Edison Lee has given his Hold rating due to a combination of factors impacting Xiaomi’s market performance and earnings outlook. While the company has achieved some success in premiumization efforts in China, a large portion of its smartphone portfolio continues to be in the lower price segment, with 62% of devices priced under $200 in 2024. This exposes Xiaomi to greater vulnerability amid rising memory costs, which are projected to squeeze margins significantly. Furthermore, the current memory shortage limits Xiaomi’s ability to negotiate favorable terms, potentially impacting profitability further.
Edison Lee also expressed concerns about declining sales volume forecasts, particularly for low-end smartphones, and lowered expectations for gross margin in both 2026 and 2027. Additionally, competition from Samsung, which benefits from internal memory supplies and a strategy prioritizing market share, poses further challenges for Xiaomi. Despite some improvements in average selling prices (ASP), the company’s adjusted EBIT and earnings projections were significantly reduced, leaving limited near-term drivers for stock optimism. As a result, the analyst sees Xiaomi’s current valuation as fair but advises holding the stock given these ongoing pressures and uncertainties.