What happened

The stock of Chinese electric vehicle maker XPeng (XPEV 1.81%) jumped as much as 14% Friday morning even with shares of its better-known competitor, Nio, in negative territory. The irony is that it was XPeng's earnings report that likely caused Nio to drop nearly 3%. But XPeng stock held onto a gain of 8.6% as of 12:45 p.m. ET.

So what

XPeng reported disappointing fourth-quarter 2022 earnings and revenue results and provided equally disappointing forward guidance. But its shares jumped anyway.

Two things help explain investors' reaction. First, XPeng shares have already dropped more than 60% over the past 12 months. Perhaps more importantly, though, management said the company has a plan to restructure and cut costs.

Now what

XPeng reported a loss of $0.20 per share on sales of $750 million in the fourth quarter. That marked a significant drop from revenue of more than $1.2 billion. Vehicle deliveries in the fourth quarter also declined by 47% year over year to just 22,204.

A white XPeng EV sedan on an urban freeway.

Image source: XPeng.

Management projected first-quarter 2023 vehicle deliveries of only 18,000 to 19,000, which would represent a year-over-year drop of nearly 50%. It also was well below the expectations from Wall Street for deliveries of about 23,000 units. But investors are looking beyond those results and pushing shares higher based on the company's strategic plan.

CEO He Xiaopeng said the slowdown in XPeng's business has prompted the company to create a reorganization plan. He said that after a review of its strategy, the business will rely on its advanced technologies to grow. He stated, "From 2023 to 2027, the industry will move from a phase of rapid EV penetration to an era of accelerated disruption by smart technologies, and we are confident that we will further strengthen our leadership in smart EV technologies."

The company also said it expects to resume growth in sales and market share and to cut costs across its business. That was enough for investors to feel the share price has dropped sufficiently to take a chance on this risky stock.