Chinese stocks suffered their worst single-day sell-off since 2008 on Monday, and XPeng (XPEV -1.39%) stock is seeing a dramatic pullback. The China-based electric vehicle (EV) company's share price was down roughly 13.9% as of 2:30 p.m. ET.
The market is worried that China's close ties with Russia could lead to sanctions, an increased likelihood of stocks being delisted from U.S. exchanges, and other developments that would negatively impact investors. In addition to these bearish catalysts, China is also facing the rapid spread of the coronavirus omicron variant and has implemented lockdowns and other measures to curb the outbreak.
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Is it time to pounce on this beaten-down EV player?
With today's sell-off, XPeng now has a market capitalization of roughly $17 billion and is valued at approximately 2.7 times this year's expected sales. For an electric vehicle company that's growing at a rapid clip, the stock looks cheap along traditional valuation lines, but the picture is more complicated. Strong business performance hasn't been translating into strong shareholder returns for XPeng and many other Chinese stocks lately, and it's possible that more turbulence is coming down the pike.
The company published its February vehicle-delivery update earlier this month, and the results were generally quite encouraging. The company delivered 6,225 smart EVs in February, which represented an increase of 180% year over year. Deliveries of XPeng's P7 sports sedan were up 151% year over year to reach 3,537, and the company delivered 2,059 of its P5 family sedans and a combined 629 units of its G3 and G3i compact SUVs.
For risk-tolerant investors willing to wade into the challenging geopolitical and macroeconomic backdrop at hand, the recent sell-offs have presented an opportunity to buy the stock at levels not seen since shortly after the fast-growing company's initial public offering in August 2020. If some of the uncertainty along those lines dissipates, there's a strong chance that the stock will deliver impressive gains from current pricing levels. However, the overall outlook remains fraught due to these factors, and investors without an appetite for risk and volatility will probably want to steer clear of the stock despite its seemingly attractive valuation metrics.
