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Chinese stocks have been in focus in recent weeks, with the blowout pre-Golden Week holiday rally in the benchmark CSI 300 Index ($CSHZ) followed by the sharpest sell-off since the COVID-19 era. The breakneck volatility has been fueled almost entirely by economic stimulus news, with traders pricing in expectations for a massive “bazooka”-style package out of Beijing - and then quickly taking profits when the announced measures fell short of estimates.
One Chinese stock that has been in focus amid the heightened volatility is Zeekr Intelligent Technology (ZK), an electric vehicle (EV) startup. ZK stock is now up more than 41% over the past month, propelled by China's recent economic stimulus measures and its own well-received September deliveries data.
However, while the recent momentum is strong, potential investors may want to approach ZK stock caution. China's economic policies can be unpredictable, and the competitive EV market presents its own risks. While stimulus efforts might boost EV sales, these incentives do not address tariffs in the U.S. and Europe. Moreover, as supply increases, it could lead to a surplus that the market cannot sustain.
Is ZK's recent breakout sustainable, or just a temporary surge fueled by stimulus? Here's a closer look for investors considering Zeekr stock.
About Zeekr Stock
Founded in 2021, Zeekr Intelligent Technology (ZK) is a premium EV company that is rapidly gaining traction in the automotive world with its battery electric vehicle (BEV) technology. With China's aggressive push towards electrification and substantial government support for the EV industry, ZK is well-positioned to compete with established players in the industry.
Zeekr has a solid lineup of vehicles in its portfolio that distinguish it from other companies. The ZEEKR 001, ZEEKR X, and ZEEKR 009 are standout models, offering a range of about 700 km on a single charge and acceleration from 0 to 100 km/h in just 3.8 seconds, an impressive technology. These vehicles are a testament to the company's approach towards the premium EV segment, and set the stage for future growth trends.
The Chinese EV company made a memorable debut on the NYSE in May. The stock opened at $26, significantly above its IPO price of $21. ZK's all-time high of $32.24 was set the next day, and the shares have generally sagged since. However, after a lengthy consolidation period around the lows from mid-August through September, ZK was primed and ready to break out on Beijing's stimulus news.
ZK stock has already pulled back 24% from its near-term high of $31.50 on Monday, allowing investors to buy the dip.
Zeekr Posts Strong September Deliveries
On Oct. 1, Zeekr reported its delivery update for September 2024, where it delivered an impressive 21,333 vehicles in a single month - up 77% year-over-year. On a year-to-date basis, deliveries of 142,873 were up 71% year over year.
Late in the month, the company started deliveries of its new SUV, the ZEEKR 7X. This environmentally friendly vehicle combines luxury features with off-road driving capabilities, making it an appealing choice for rural and urban consumers.
Previously, on Aug. 21, ZK posted second-quarter revenue of $2.81 billion, an impressive 58% increase from last year, beating estimates by $328 million. This excellent revenue growth was driven by strong vehicle deliveries, which more than doubled year-over-year. Additionally, sales of batteries and other components climbed 36% year over year on higher battery pack volumes.
On an adjusted basis, Zeekr narrowed its loss from the previous quarter, reporting a normalized actual EPS loss of $0.76, which topped expectations by $0.63 per share. The company's losses were reduced to $121 million, a substantial improvement compared to the loss of nearly $196 million in the same period last year.
Zeekr delivered a total of 54,811 vehicles during Q2 at a margin of 14.2%, up from 13.6% last year. The fast-growing EV company also improved its gross margins, which rose to 17.2% in the quarter from 12.3% in the year-ago period.
"We made significant strides in optimizing costs while maintaining high-quality delivery standards, contributing to sustainable margin and profitability improvement," said CFO Jing Yuan.
What Do Analysts Say About Zeekr Stock?
Following the September delivery report, Macquarie Group initiated an “outperform” rating on Zeekr and set a price target of $33, arguing that the shares "look overly penalized for the corporate structure complexity and low liquidity."
Analyst Eugene Hsiao added, "The company also announced plans to sell a PHEV model in 2025, which brings its mix more into competition with sister brands Lynk & Co, Polestar (PSNY), and Volvo."
Overall, Macquarie believes that Zeekr's competitive product mix positions it well to boost its local market share from 7% in fiscal year 2023 to an anticipated 13% by 2026.
Wall Street analysts are highly optimistic about ZK's prospects. Of the five analysts in coverage, four give it a "strong buy" rating, and one has a "moderate buy." The average 12-month price target of $31.07 indicates an expected upside potential of around 30.3%.
The Bottom Line on ZK Stock
Zeekr is a fast-growing EV company with all of the key elements needed to succeed in the industry, including innovative designs, advanced technology, and a solid commitment to sustainability. Although the company is not yet profitable, its revenue growth is truly impressive.
Moreover, with China’s economic stimulus measures, the country's EV industry could be set to experience significant expansion. ZK is well-positioned to capitalize on this growth, though stiff competition from the many established domestic players remains a concern. A healthy risk appetite is a prerequisite for investing in ZK stock, but betting on this EV could prove to be a lucrative investment over the long haul.
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