Stocks’ Details 

PayPal Holdings, Inc.

Q3FY20 Result Highlights: PayPal Holdings, Inc. (NASDAQ: PYPL) is an online payment company that enables digital and mobile payments on behalf of consumers and merchants. As on 5 November 2020, the company’s market capitalization stood at ~$240.01 billion. During the September 2020 quarter, the company witnessed a YoY growth of 55% in net new active accounts to 15.2 million and a growth of 36% (YoY) in total payment volume (TPV) to $247 billion. For the quarter, the company reported total net revenue of $5.46 billion, up 25% on pcp. As at 30 September 2020, the company’s cash, cash equivalents, and investments stood at $17.6 billion. Over the quarter, the company introduced short-term installment products in the U.S. and U.K.

Key Operating and Financial Metrics (Source: Company Reports)

Outlook: For Q4FY20, the company expects TPV growth on a percentage basis to be in the range of low to mid 30%. Further, the company expects its Q4FY20 revenue to grow in the range of 20%–25% at current spot rates and 20%–25% on an FXN basis. For the full year 2020, the company expects TPV to grow by ~30% and revenue to grow in the range of 20%–21% at current spot rates.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: Over the last six months, the stock of PYPL has provided a return of 39.83% and is currently inclined towards its 52 weeks’ high price of $215.83. On a technical analysis front, the stock has a support level of ~$186 and a resistance of ~$212.97. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with a correction of low single-digit (in % terms). Considering the stock price movement in the last six months, current trading levels and valuation, we are of the view that most of the positive factors have been discounted at the current juncture. Hence, we suggest investors to wait for a better entry level and give an “Expensive” rating to the stock at the closing price of $204.56, up by 5.29% on 5 November 2020.

XPeng Inc.

October 2020 Highlights: XPeng Inc. (NYSE: XPEV) is involved in the designing, developing, manufacturing, and marketing of Smart electric vehicles (Smart EVs). In late August 2020, the company closed its IPO for American Depositary Shares (ADS), raising approximately $1.5 billion. As on 5 November 2020, the company’s market capitalization stood at~$25.8 billion. During the month of October 2020, the company delivered 3,040 Smart EVs, taking the total year-to-date deliveries to 17,117 units, representing a YoY growth of 64%. In October 2020, the company completed the production of 10,000 P7s. Over the month, the company witnessed decent business momentum, underpinned by fast production ramp-up and robust demand for its Smart EVs.

H1FY20 Results: For the six-month ended 30 June 2020, the company reported total revenue of US$141.94 million. Over the period, the company delivered 5,499 units of Smart EVs, as compared to 7,165 units delivered in 1HFY19. For H1FY20, the company reported total net loss of US$112.64 million.

H1FY20 Results (Source: Company Reports)

Outlook: Looking ahead, the company intends to use the proceeds of its IPO for research and development of its Smart EVs and technologies, for selling and marketing and expansion of sales channels and general corporate purposes. The company plans to release its Q3FY20 results on 12 November 2020.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months 

Stock Recommendation: Over the last one month, the stock of XPEV has provided a return of 81.97% and recently touched its 52-weeks high price of $36.44. On the technical analysis front, the stock has a support level of ~$23.41 and a resistance of ~$36.35. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers like NIO Inc (NYSE: NIO), Tesla Inc (NYSE: TSLA), General Motors Co (NASDAQ: GM), to name few. Considering the substantial rise in the stock price over the last one month period, current trading level and valuation, we suggest investors to wait for better entry level and give an “Expensive” rating on the stock at the closing price of $35.85, up by 30.89% on 5 November 2020.

Electrameccanica Vehicles Corp.

Arrival of First Production SOLO EVs: Electrameccanica Vehicles Corp. (NASDAQ: SOLO) is a development-stage electric vehicle designer and manufacturer company. As on 5 November 2020, the company’s market capitalization stood at ~US$241.74 million. On 29 October 2020, the company announced that it is going to open six new retail locations across the western U.S. within November 2020. SOLO announced the arrival of the initial shipment of production vehicles for its flagship SOLO EV (Electric Vehicles) in North America. 

H1FY20 Result Highlights: For the six months ended 30 June 2020, the company reported total revenue of C$133,489 and gross loss of C$72,428. During Q2FY20, the company closed $20 million at market financing through a registered direct offering that resulted in net proceeds of ~US$18.65 million. As at 30 June 2020, the company had cash and cash equivalents of C$51.25 million.

H1FY20 Results (Source: Company Reports)

Outlook: For H2FY20, the company seems well-positioned for full-scale deployment of the SOLO with a robust, growing retail footprint across the western U.S. along with an aggressive marketing campaign to educate the buyer. With a cash balance of around C$51.25 million (as at 30 June 2020), the company is well placed to execute all its near-term operating objectives.

Stock Recommendation: The company has a limited operating history that poses challenges to evaluate the business and its future prospect. The stock of SOLO has provided a return of 277.07% in the past six months and is trading slightly above the average of its 52-weeks trading range. On the technical analysis front, the stock has a support level of ~US$2.36 and a resistance of ~US$5.2. On a TTM basis, the stock is trading at a price to book multiple of 4.4x, higher than the Industry Median (Automobiles & Auto Parts) of 1.5x, demonstrating that the stock might be overvalued.  Considering the company’s limited operating history, stock price movement in the past six months period, its current trading level, and valuation on TTM basis, we suggest investors to “Avoid” the stock at the closing price of $3.77, up by 26.94% on 5 November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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