To The Moon

Why the Sell-Off Happened Despite Both Companies Posting Excellent Quarters

When $XIAOMI-W(01810)$ and $XPENG-W(09868)$ reported earnings, I half-expected a polite round of applause from the market. Instead, both stocks were thrown down the nearest lift shaft. Xiaomi delivered nearly 200% auto revenue growth with margins climbing to 25.5%. XPeng crossed 20% gross margin for the first time, hit record deliveries and narrowed its net loss. Yet the share prices behaved as if both firms had announced a surprise pivot into artisanal candle making.

When great earnings meet markets in a particularly dramatic mood

This was pure sentiment, not fundamentals. Investors came in hoping for immaculate guidance in an environment that still behaves like China is trying to recover from three different slowdowns at once. You can feel the market’s craving for certainty: stable consumer spending, predictable policy, and competition that isn’t intensifying every other Tuesday. Neither Xiaomi nor XPeng can control macro anxieties, and so their perfectly strong numbers became collateral damage in a market that simply wanted reassurance rather than progress.

Xiaomi: A Fundamentally Strong Business Priced Like It’s in Witness Protection

At 5.39 USD on the ADR, $Xiaomi Corp.(XIACF)$ trades at around 18 times forward earnings. That’s already conservative for a business growing revenue at 22%, delivering triple-digit earnings growth, and sitting on over 110 billion RMB in cash. You’d expect some enthusiasm for a company posting nearly 100 billion RMB in gross profit and steadily improving operating margins. Instead, the market still insists on treating Xiaomi as a cyclical consumer hardware maker rather than a steadily compounding ecosystem.

Sentiment drags Xiaomi lower while the trend keeps misreading reality

The auto segment is where the misunderstanding becomes most visible. Investors remain convinced Xiaomi is dabbling, experimenting, or otherwise trying out a midlife-crisis hobby. The numbers disagree. The ramp is ahead of schedule, margins are structurally improving and the company has clearly decided the car isn’t just a product but a distribution vector for software, services and ecosystem monetisation.

That’s the part of the business consensus models continue to undervalue. Xiaomi’s strength has always been the compounding flywheel of hardware installed base → services → recurring margin. Cars now join that flywheel, not as a burden, but as a catalyst.

Still, I’m not buying at a fair price. I’m buying at a price the market will later pretend it never doubted. For me, that means a forward P/E of 12–13. Convert that into ADR terms and you get a bottom-fishing range of 3.60 to 4.00 USD. At that level the market is essentially pricing the auto division at cost while ignoring the ecosystem upside. Below 4.00 USD, I’m not just buying earnings; I’m buying future optionality for free.

XPeng: A Technology Company Still Being Priced Like a Near-Religious Experience

$XPeng Inc.(XPEV)$ closed around 22.62 USD on the ADR, giving it a market cap of approximately 23–24 billion USD. Once I adjust for the firm’s net cash, the enterprise value sits slightly lower — around 22 billion USD. For a company still running negative net income and negative EBITDA, that valuation assumes a very smooth road to profitability.

XPeng’s price still stretches further than its fundamentals justify

The bull case for XPeng is coherent: its full-stack assisted driving system, architectural design and software could create a licensing business as rivals consolidate. The technology is genuinely differentiated. But the willingness to pay for that optionality today overshoots the actual cash-flow reality.

Here’s the step most analyses gloss over: XPeng’s trailing twelve-month gross profit is about 12 billion RMB, or roughly 1.6 billion USD. If I’m buying a company still in transition, I prefer to anchor valuation to something tangible — in this case, gross profit rather than dreams of future software licensing empires.

And this is where the math matters. I’m not paying a 22 billion USD enterprise value for 1.6 billion USD of gross profit. I want the EV to reflect something much closer to a single year of gross profit — not ten. Backing this through the capital structure brings my comfort range to an ADR level of 14 to 16 USD. That’s the point at which I’m being compensated for execution risk rather than subsidising it.

Above that? I’m paying for belief. Below that? I’m buying a real business at a realistic price.

Where the Market Gets Both Companies Wrong (Briefly, Not Repetitively)

The mispricing is simple. The market treats Xiaomi as if it has one engine when it actually has three — hardware, services and now automotive ecosystem leverage. Meanwhile XPeng is valued for long-term optionality despite still operating in short-term cash-flow reality. Both are mismatched, but each in its own direction.

The Risks I Actively Price Into My Targets

This isn’t blind optimism. For Xiaomi, auto margins could compress sharply if competition intensifies or battery costs reverse their recent trend. The business remains exposed to China’s uneven consumer conditions. For XPeng, the most material risk remains time. If profitability takes longer than expected, capital markets will eventually demand another raise, and that catalyses a different sort of sell-off. And both companies remain at the mercy of China’s occasionally erratic macro rhythm.

These risks don’t negate the opportunity; they define the prices that make the trade rational.

My Actual Bottom-Fishing Levels (Unchanged and Now Fully Justified)

After tightening the maths and removing the sentiment noise, my view is clear. I’m prepared to accumulate Xiaomi if the ADR drops into the 3.60 to 4.00 USD range, where pessimism peaks and the valuation stops pretending the auto division doesn’t exist. XPeng becomes attractive at 14 to 16 USD, where enterprise value aligns with current gross profit rather than hypothetical licensing windfalls.

Until then, I’m happy to watch the volatility from a safe distance — with the same calm patience I reserve for train delays and VAR decisions in football.

Patience cuts through chaos more cleanly than most algorithms can

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