Is Xpeng a buy?
Xpeng is a Chinese company dedicated to the manufacture of high-end electric vehicles. It was founded in 2015 by Xia Heng and He tao, together with two important partners who believed in the project: He Xiaopeng, former executive of Alibaba and Lei Jun, founder of Xiaomi.
This company, also known as Xiaopeng Motors, decided to enter the competitive electric vehicle segment, a sector dominated by Tesla and where NIO already existed in China. However, despite also being luxury vehicles, Xpeng has differentiated itself because its main objective is to provide comfort in its vehicles, beyond speed.
The company currently offers two vehicle models, the G3 and the P7. In the case of the G3, it is an SUV that began marketing in 2018 (although its foundation was in 2015). While the P7, a very comfortable sedan, they brought it to market in 2020.
Its IPO was on August 27, 2020, so there is no historical information about its performance as can be found from other companies. But at the time of its IPO, in the company's prospectus, it notified that by July 2020 it had sold 18,741 units of the G3 and 1966 units of the P7.
These are obviously quite small numbers when compared to other companies in the same sector. In fact, although Xpeng is listed on the New York Stock Exchange, it only markets its vehicles in China because as we mentioned, it is a small company.
An important detail is that when reviewing the company's financial reports (you can find them on its official website) we find that the company since its foundation has generated losses.
The year 2020 has been the only year in which sales have exceeded the cost of sales generating 40 million dollars of profit. However, this figure is only about sales because when operating expenses (research and development, administrative and general expenses) are added in, Xpeng has a net loss of $418 million. And it was their best year ever.
Straight up we recommend you look at other established companies like Tesla if you are interested in investing in the electric vehicle sector. Because at the end of the day, if all you are offering is the potential going forward, you are not offering anything that Tesla or NIO does not.
What are the instruments you can trade?
What are ETFs?
Exchange-Traded Funds or ETFs are similar to index funds. They can be described as a combination of stocks and mutual funds, including the best features of both. They can be traded like regular stocks, but include a wide diversity of assets and their fees are much lower than those of an actively managed fund.
This is the best option for people who can invest in the long term, especially for those who are starting to trade, because it is inexpensive, diversified, and the risk is lower.
You may think differently, but benchmark returns are very difficult to beat and very few fund managers achieve that, apart from some famous cases.
If someone brags about having beaten the benchmark, they probably did it for a short time or on a specific occasion, or sometimes the fees are so high that indexing would be a better decision anyway.
Index funds offer solutions to both concerns: their fees are insignificant and in the long term they tend to beat active managers.
Currency trading or Forex consists, as the name says, in the exchange of currencies. Put differently, is the conversion of one currency to another to make a profit through the operation.
If you decide to trade euros and dollars, you acquire euros at their price in dollars, with the expectation that after buying the first currency (the euro) it will revalue compared to the second (the dollar), to make a profit by selling it. Assume you entered when a euro is worth 1.10 USD and you close when it reaches 1.15: consequently, that margin will be yours once you sell back.
You may be thinking by now that trading with currencies requires investing considerable amounts, and that is correct, since variations are usually minimal, and often you will need to use high leverage (which sometimes can be too much of a risk). Our advice for those starting in the world of trading is to choose another market to begin with, since Forex is risky and complex.
You can exchange with the most common currency pairs on this broker but consider that in this market sales are made through contract for differences, thus you won't own the real asset.
About Contracts for Difference
You probably have seen the initials CFD repeatedly if you entered this broker before. Before we explain this further, you must know that cryptocurrency trading on the platform is only CFD when you are short-selling.
We will also explain terms such as leverage and “going short”, in case you are thinking about day trading cryptocurrency or more advanced practices.
this broker lets you bet both “in the black” and “in negative”. In a hypothetical case: you believe that the Xpeng will go down, so the logical thing is to think “if it is going to depreciate, I'll just wait and go when it has gone down”. But if it really falls, it might mean extra money for you.
You can accomplish that by “going short”. Here's how it works:
- You ask someone to lend you, for instance, 100 units of Xpeng, which total value at the moment is $ 5,000 (obviously, these numbers are made imaginary)
- You sell the 100 units and earn $ 5,000
- As you supposed, it devaluates, and the unit of Xpeng now costs $ 30 instead of $ 50
- Again, you purchase the 100 units, but at the current value, $ 3,000
- Then you give back the 100 units to the loaner
- You will have made $ 2000, since you keep the difference
Keep in mind that it is much simpler than it sounds: we can just say that by trading in Xpeng you can also earn money if you foretell the downs.
What is leverage?
Are you familiar with the term “leverage”? Just in case, we'll define it briefly: trading allows you to invest higher figures than what you really have. For instance, if you have $ 100 and you choose to leverage x2, the amount of your investment will be $ 200.
Leverage, Take Profit and Stop Loss
Let's pretend that you are sure that Xpeng will rise, and you consider “going long. You have $ 1,000, but you actually can invest more and make more money.
Perhaps you could go to your bank, request a credit, put an asset as collateral, wait for it to be accepted and receiving the money, and then purchase Xpeng… But maybe once you have made all that, your prediction could've been confirmed a long time ago, and Xpeng would be already so high that it is not worth investing.
Thanks to leverage, you can obtain that amount with two clicks. It's like borrowing money, but much easier and quicker, and with the advantage that you will be getting it directly from the broker. Before trading, you will find the leverage options as in the image below:
When trading in different markets you can use higher leverage. This is because leverage is regularly for short-term operations, and cryptocurrencies tend to be a medium or long-term investment. Let's talk a bit more about how leverage works:
- If you want to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 (remember that$ 1,000 are a “loan” from your broker).
- A few days later, Xpeng price does increases, as you thought, and now the cost of your investment is $ 2,400 (20% more), so you decide to sell back.
- Once the $ 1k from leverage is deducted, you will have $ 1,400 left; which means the net profit is $ 400, since the other $1,000 was yours from the beginning.
In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is quite good.
But there's always a downside. If all goes as you planned and the asset increases, you will make profits. Nevertheless, if the price goes down, you will also lose more money in the blink of an eye.
For instance: if the price falls by 10%, you won't lose $ 10, but twice that figure, which means $ 20. Therefore, when using leverage it is fundamental to know about Take Profit and Stop Loss.
Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price.
If you bought Xpeng shares at $ 100, you request the broker to close your operation when it reaches $ 120. That way, you make sure you won't change your mind and decide to wait a bit longer in case it keeps going up, which could make you lose it all.
On the other hand, when trading with leverage you should always use Stop Loss, because a small decrease in the price of an asset can lead to a substantial loss. Always remember to mark a Stop Loss lower than that suggested by your broker.