Friday Four Play: The “EV Smackdown!” Edition
Welcome to Friday, Great Ones…
Let’s get ready to rumbllllllle!
In this corner, we have up-and-coming Chinese electric vehicle (EV) star XPeng (NYSE: XPEV).
And in the other corner, we have American EV juggernaut … the killer from California (or is it Texas now?) … the guillotine of gasoline … the one, the only Tesla (Nasdaq: TSLA)!
I’m here to tell you, EV fans, this is gonna be one heck of a battle. While Tesla has Elon “The Space Cadet” Musk in its corner, XPeng has the entire country of China behind it — and I mean that quite literally.
XPeng came out guns a-blazin’ yesterday with some mid-match smack talk. President and Vice Chairman Brian Gu took his beef with Tesla to Yahoo Finance:
Better features than Tesla! Ooooh! Burn!
How’s that for … umm … well, polite smack talk?
(Guys, is this really the best “smack talk” we’ve got? It’s like a My Little Pony lovefest over there. Whatever, I’ll run with it…)
To catch you up on the battle for the Chinese EV market between XPeng and Tesla: Last month, XPeng saw deliveries skyrocket 617% to 6,565 vehicles. What’s more, 2021 deliveries are up 459% to 30,738 EVs.
XPeng’s P7 sedan and G3 SUV are flying off the shelves like hotcakes.
But Telsa is no slouch, rattling off 227,000 new EV deliveries in China last month. That’s a whopping 166% jump year over year.
But Gu wasn’t done throwing hands:
In the last few months, our growth has outpaced the industry as well as Tesla in China. But I think it’s a long race because ultimately, this market will not be dominated by one or two companies.
It will probably be a number of players occupying probably large market share positions of 10% and above. That will likely be the trend, and we hope to be one of those top players.
What’s that? XPeng’s growth is outpacing Tesla’s in China … and the company hopes to be a top player?
Sigh … this isn’t even up to Catholic school playground smack talk standards. Gu, you really need to get rid of this “friendship is magic” talk and really let loose! Show Tesla who’s boss! Elon wouldn’t hold back. (He would grovel before Xi Jinping after offending Chinese sensibilities after the fact, though.)
Anyway, this was the most disappointing “smackdown” by a rival I’ve ever seen. And Wall Street agrees. XPEV dropped more than 1% today despite the rest of the market enjoying a nice solid rebound rally.
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And now for something completely different! Here’s your Friday Four Play:
No. 1: GM’s A Tech Stock?
Great Ones, y’all know I’m pretty big on General Motors’ (NYSE: GM) shift into high gear in the EV market. I think this is an excellent move for GM and will keep the company relevant amid the EV auto market disruption.
But the ridiculous hype surrounding EV companies needs to stop. It’s getting out of hand.
For example, Wedbush Analyst Dan Ives — is this guy literally everywhere? — initiated GM with an outperform rating and an $85 price target. That’s a 50% increase to Thursday’s closing price.
But that wasn’t enough. Dan also threw out this banger: GM will be seen as “a broader disruptive technology play that can start to trade at multiples similar to the likes of Tesla.”
Oh, honey. If the establishment takes part in the revolution, it’s no longer a revolution. It’s the norm.
In other words, now that GM is going full-bore on EVs, EVs are no longer disruptive. As such, pricing GM with similar multiples like Tesla makes no sense. That time has passed.
At this point, GM is just trying to keep up with Tesla. If it wanted to be truly disruptive, it’d start churning out hydrogen fuel cell vehicles — which is about the only viable tech out there that could be considered disruptive to the new EV norm.
So, while I agree with Dan in his assessment that GM is overweight — which is wishy-washy analyst speak for “buy” — the level of hype for GM is way overweight. I’d expect solid returns on any GM investment, but curb your expectations below the 50% upside Dan is promoting.
No. 2: Learning To Fly … In Chinese
So, the Boeing (NYSE: BA) 737 Max has returned to the skies in the U.S. and Europe. But what about China? With a roaring middle class, Chinese airspace is one of the fastest-growing airline markets in the world.
But China is still holding out. Go figure. Boeing announced today that Chinese officials are ready to start open testing on the 737 Max — the first step back into the Chinese skies for Boeing.
For its part, Boeing is sending 35 pilots and engineers to China this month to help speed up the process. Chinese regulators are also haggling over 737 Max simulator sessions for its pilots. Despite Boeing all but bending over backward for China, the country remains chill on 737 Max approval. According to reports, China is concerned about the plane’s design changes and its pilots’ training around those changes.
That’s one story for China’s feet-dragging on the 737 Max.
The other is that China heavily favors its own new jet airliner, the Comac C919 narrow-body plane. According to Investor’s Business Daily, China could be hemmin’ and hawin’ — that’s Southern for wasting time, by the way — on the 737 Max in hopes of getting the C919 into the air first.
Unfortunately for China, the C919 uses U.S. technology and would need U.S. regulators’ approval before it can be exported. This here is what we call a good old-fashioned Mexican standoff.
BA rallied more than 1% on the news.
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No. 3: Jeans Wilder
This earnings season, we’ve seen God-awful earnings reports shoot stocks into the stratosphere… We’ve seen double beat-and-raise reports lead to sell-offs…
You just can’t win with the 2021 two-step, but that didn’t stop Levi Strauss (NYSE: LEVI) from trying to tango.
So how’d that work out for Levi? Well, you ever try dancing in skinny jeans?
The denim distributor’s revenue rocketed up 156% year over year, reaching $1.28 billion on the quarter and topping estimates for $1.21 billion. Earnings absolutely slayed expectations as well, coming in at $0.23 per share while analysts only expected earnings of $0.09 per share.
Better still, Levi says sales in the U.S. and China are back above 2019’s pre-pandemic levels. Inflation worries? No fear here — Levi’s already worked through the price increases and source material savings to quell those qualms.
With the pandemic (hopefully) coming to a close, Levi is talking up a “new denim cycle” that’s helping push sales higher, which I took to mean: “Gym shorts are out. Jeans are back in.”
You figure that, even accounting for the changing fashion trends that largely elude me, many people want to completely redo their wardrobes for post-lockdown life. CEO Chip Bergh notes that “35% of U.S. consumers have changed waist sizes, up and down” throughout the pandemic, which … umm … fits my experience, I don’t know about yours.
But for all the good that Levi’s double beat did … for all the record-high profit margins the company praised … that LEVI rally died faster than a pair of ripped jeans in a Slipknot mosh pit.
The don of denim went on a tear yesterday, riding up 5% before it immediately gave up all those gains.
No. 4: Fake Tenders, Real Tendies
Beyond Meat (Nasdaq: BYND) is bringing plant-based chicken to restaurant menus.
Up to now, all the fake-meat fiends have focused on burgers. But there’s a lot more to the meat-eating market than just beef. Sure, you have a few frozen food makers that have uber-expensive frozen plant-based chicken, but mainstream America isn’t buying that on the regular.
If you’re going out to eat and look for plant-based options, all you have is the Beyond Burger and the Impossible Burger. Where’s my imitation chicken sandwich — my Filet Faux Fish? Sham ham and eggs, anyone?
Moving into chicken is a no-brainer. Giving customers and restaurant-goers more options … usually gives you happier, higher-paying customers. People want choices with their food? I’d have never guessed.
Who looks at chicken nuggets anyway? They’re already mashed-up bits of mystery meat … depending on where you order said nuggets. Beyond can put some plant-based matter into vague dinosaur shapes and call it a day — it’ll be smothered in hot sauce and honey mustard in like two seconds anyway.
Beyond’s already tested its fake fried chicken recipe with KFC, and if Yum Brands is already on the case … well, fake-chicken chalupas from Taco Bell are only a matter of time. I bet other chains are itching to expand their vegan- and vegetarian-friendly menus with the Beyond Chicken as well.
CEO Ethan Brown has said that the chicken tenders are priced “so the product can be sold across the restaurant industry.” Which, I’d have to hope so. Chicken tenders and fries is probably the cheapest meal you can get anywhere, and if Beyond can formulate and price its product right, that product will be on menus everywhere.
I’ll say this though: Beyond Meat often likes to build hype about its new food before it has the production power to fully launch those items on a grand scale. It’s why Beyond stopped selling its first iteration of frozen chicken tenders some years ago to buckle down on building out Beyond Burger production.
If Beyond can square away its production line, it has a veritable gold mine with these chicken tenders, which only opens the door to more alternative meats down the line. Yes, even you, fakin’ bacon.
Ladies & Gentlemen … The Weekend!
It’s been real, Great Ones, but it’s beyond time to call it quits and wrap up the week. That is … unless some extra greatness were to magically hit your inbox tomorrow morning.
Something like, I don’t know, a deep dive on your favorite tech stocks … a trade idea for you options addicts out there … the usual weekend romp here at Great Stuff.
I’ve already said too much — you’ll just have to keep an eye on your inbox this weekend and see what shows up!
In the meantime, why not drop us a line? Market-related or not, I know you’ve got a rant brewing or some new stock ideas you’re stewing on. Let us know what’s on your mind! You might even find your name in big, bold digital print in our next Reader Feedback issue.
Do you have strong opinions on plant-based imitation chicken? Are you jazzed up about that whole “denim cycle” thing? And who — oh who? — will win the smack-talking duel between Tesla and XPeng?
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Until next time, stay Great!
Editor, Great Stuff