Xiaomi stock price has entered beast mode: more upside left?

The Xiaomi stock price continued soaring, reaching a high of $24, its highest point since 2022 bringing its market cap to over HKD 605 billion or $72.4 billion. This growth makes it one of the biggest Chinese technology companies.

Xiaomi’s growth is continuing

Xiaomi, popularly seen as China’s Apple, sells millions of smartphones globally each year. 

It has also expanded its business to other industries like accessories, wearables, gaming, and home accessories. Most recently, the company has expanded its business in other industries, including electric vehicles. 

Its growth over the years has been because of the quality of its products and the prices. In most cases, Xiaomi sells top-of-the-range products for minimal costs, which has endeared it in countries like China and India. 

Data from SeekingAlpha shows that Xiaomi’s business has been volatile in the past few years. Its annual revenue rose from over $29.5 billion in 2019 to a peak of $51.6 billion in 2021. 

The revenue then dropped to $40.6 billion in 2022, followed by $38.7 billion last year. Its revenues in the trailing twelve months rose to $42.5 billion.

Xiaomi is also highly profitable, with its total net income coming in at $2.5 billion in the last four quarters.

The biggest challenge, however, is that Xiaomi makes most of its money in the smartphone industry, which has been slowing for a while. People are staying with phones for longer, helped by the quality of the shipped devices. 

The most recent data by IDC showed that worldwide smartphone sales grew by 6.5% in the second quarter as momentum continued to build. Shipments rose to 285.4 million, the fourth consecutive quarter of growth.

Xiaomi has a large market share in the industry as it shipped 42.3 million devices, making it third only to Samsung and Apple. The other top brands are Vivo and OPPO. This recovery explains why the Xiaomi stock price has bounced back in the past few months.

Xiaomi’s smartphones are the number 2 in Latin America, 3 in Africa, and 3 in Europe. Also, it is the number 1 brand in India and number 2 in the Southeast Asian region.

Xiaomi’s sales are rebounding

The most recent results show that Xiaomi’s revenues bounced back in the second quarter, reaching RMB 88.8 billion, a big increase from the RMB 67 billion it made in the same period last year. 

Its gross profit jumped by almost 30% to RMB 18.3 billion, while its profit for the period was over RMB 5 billion.

Most of its revenue came from the smartphone and Internet of Things (IoT) busines, whose revenue rose by 22% to RMB 82.5 billion. 

The company’s new EV business continued firing on all cylinders, selling over 27,307 vehicles. Its goal is to sell 120k vehicles this year, a remarkable performance for a company that has just gotten into the business. It was also the best-selling pure-electric sedan in July.

Most importantly, its electric vehicle brand is seeing healthier margins. In the most recent quarter, it had a gross margin of 15.4%, higher than other Chinese EV brands. Nio has a gross margin of 7.8%, while XPeng has 7.29%. 

Therefore, while the car business will drag its profitability for a while, there are rising odds that it will break even in the coming years. The challenge, however, is that EV growth is expected to slow in the next few years, which could affect its growth and profitability.

Additionally, Xiaomi has one of the top balance sheets in China, with over RMB 141 billion in cash and short-term investments. It also returned billions of dollars to shareholders through share repurchases.

Xiaomi will also benefit from the recently announced Chinese stimulus and falling interest rates globally. These catalysts will likely lead to more demand for discretionary products.

Xiaomi stock price analysis

Xiaomi stock by TradingView

The daily chart shows that the MI share price has been in a strong bull run in the past few weeks. The current phase of the rebound started on August 4, when it bottomed at H$15.38. 

It has jumped above the key resistance level at $20.35, its highest swing on May 14, and the previous all-time high. By moving above that level, the stock made the double-top pattern that was forming invalid. 

The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA), signalling that bulls are still in control.

At the same time, oscillators like the Relative Strength Index (RSI) and the stochastic oscillator have all pointed upwards, meaning that it has more momentum.

Therefore, the Xiaomi share price will likely continue soaring as bulls target the next key resistance point at H$30.45, its highest level in June 2021. If this happens, the stock will rise by over 27% from the current level.

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