Xiaomi Corp. (XIACF) posted its first profit from its electric vehicle unit in the September quarter. The unit earned ¥700,000, marking a turn from a loss of 300 million yuan in the prior quarter. As a result, the gain helped lift the group’s net profit to ¥12.3 billion, which came in above the analysts’ view of ¥9.6 billion.
TipRanks Black Friday Sale
- Claim 60% off TipRanks Premium for the data-backed insights and research tools you need to invest with confidence.
- Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off
Meanwhile, Xiaomi’s stock has dropped about 20% since May. The decline came as high chip costs and soft phone sales cut into its core strength. In turn, investors have kept a close eye on the firm as it looks to build a new source of growth.
Phone Market Pressure and EV Plans
First, Xiaomi faces a strong headwind in the phone market as it works to maintain its share in China. The firm launched a $630 phone to take on Apple (AAPL). Even so, iPhone sales made up one-fourth of the phones sold in China last month, based on data from Counterpoint Research. In addition, Xiaomi’s growth in phone sales trailed that of Oppo, as higher chip costs hurt its margins.
Next, Xiaomi is pushing hard in the EV sector. The firm aims to sell 350,000 cars this year after its shift into the field in early 2024. It shipped more than 40,000 cars in October, which matched the count from the prior month. Even so, long wait times persist due to strong demand and limited supply, and some buyers still face waits of up to nine months.
After that, Xiaomi plans to increase output, with sales set to start in Europe in 2027. The firm hopes that the strong start for its SU7 sedan and early interest in its first sport utility car will help the plan.
Finally, Xiaomi faces concern from some investors who point to delays at its plant and to safety checks. As a result, short interest in the stock has risen, which shows that some funds remain cautious about the long-term view for the group.
Is XIACF a Buy?
On the Street, Xiaomi boasts a Strong Buy consensus. Out of 26 analysts’ ratings, 23 rate it a buy, while three analysts rate it a Hold. The average XIACF stock price target is $8.20, implying a 53.41% upside from the current price.
