Xiaomi stock forecast: what’s next for the second-largest smartphone vendor?
From being blacklisted by the US to pipping Apple to take #2 spot in terms of global smartphone shipments, 2021 has been a mixed year for Xiaomi (1810.Hong Kong).
The company’s share price hit a record high of HKD35.25 in early January, but is down 38% year-to-date (YTD).
Xiaomi’s primary market in Hong Kong is experiencing a downturn due in no small part to Beijing’s crackdown on the private sector. Allegations of built-in censorship abilities in Xiaomi smartphones and souring Sino-US relationship have added to investor concerns.
Xiaomi stock news
On 21 September, the Lithuanian government told its citizens to throw away their Chinese phones after the country’s cybersecurity body claimed it had found built-in censorship capabilities on Xiaomi devices.
Terms such as “Free Tibet”, “Long live Taiwan independence” and “democracy movement” were detected and censored by Xiaomi phones, the Lithuanian cybersecurity body claimed. Censorship capabilities in Xiaomi smartphones were turned off for the EU region but could be turned on remotely, said the Defence Ministry's National Cyber Security Centre.
Shortly after the allegation from Lithuania, Reuters reported that Germany’s cybersecurity regulator, the BSI, is investigating smartphones manufactured by Xiaomi.
A few days later, the company told the Independent that its “devices do not censor communications to or from its users. Xiaomi has never and will never restrict or block any personal behaviors of our smartphone users, such as searching, calling, web browsing or the use of third-party communication software.”
US tensions
China-based tech companies were targeted during former president Donald Trump’s administration over their alleged links with the Chinese military. In 2019, Chinese telecommunications giant Huawei was added to a trade blacklist on national security risk reasons. It was alleged that Huawei’s smartphones and equipment could be used by the Chinese government.
On 12 March 2021, the Federal Communications Commission (FCC) published a list of communications equipment and services that pose a threat to national security. The list included Huawei Technologies Company and ZTE Corporation.
In January 2021, Xiaomi was designated as a “Communist Chinese Military Company” by the US Department of Defense – a move that would restrict US investment in the company.
Xiaomi filed a lawsuit against the US government for blacklisting it. In late May, a US district court issued an order removing the label on Xiaomi and subsequently lifting restrictions on US citizens’ ability to buy and hold Xiaomi stock.
Xiaomi was returned to global indices by index providers S&P Global and FTSE Russell.
Second-largest in the global smartphone market
In terms of revenue and smartphone sales, Xiaomi has had a stellar year so far. During the second quarter of 2021, Xiaomi saw global smartphone shipments surge over 86% to 52.9 million. The company overtook Apple as the world’s #2 in terms of units sold, according to tech research company Canalys.
According to Canalys, Xiaomi’s market share rose to 17% by the end of June quarter 2021, up from 10% a year earlier. Samsung held a 18% market share, with Apple making up the top three with 14%.
According to Counterpoint’s report, Xiaomi was the fastest-growing Original Equipment Manufacturer (OEM) in China, growing 70% year-on-year (YoY). Xiaomi was able to expand faster than its Chinese rivals as Huawei struggled to source key components needed for its handset as a result of US trade restrictions.
“The market has experienced a reshuffle after the US ban on Huawei. One-time market leader Huawei saw its share decline to 10% in Q2 2021 from 32% in Q2 2020. Vivo and OPPO now lead the market with 23% and 21% shares, respectively, followed by Xiaomi and Apple. All leading OEMs benefited from Huawei’s decline and grew their market shares. Realme also continued its growth streak in China, surpassing one million unit sales for the first time,” said Senior Research Analyst Ethan Qi, commenting on key vendors’ performances.
Xiaomi stock analysis: financials
In its most recent quarterly results, Xiaomi reported record high quarterly total revenue and adjusted net profit. The company posted a 64% YoY increase in quarterly total revenue to CNY87.8bn ($13.62bn), while quarterly net profit jumped 87.4% to CNY6.3bn.
The Beijing-based company said the second quarter of 2021 saw record-breaking revenue and shipments, with smartphone revenue up 86.8% to CNY59.1bn, or 67% of total revenue.
Xiaomi said the Internet of Things and lifestyle products segment posted a 35.9% YoY rise in quarterly revenue to CNY20.7bn. Xiaomi’s Internet services segment reported a quarterly revenue of CNY7bn, up 19.1%.
In July 2021, the company officially broke ground on its Changping Smart Factory in Beijing, which it hopes will support an annual production capacity of up to 10 million smartphones.
As for full year 2020, Xiaomi reported total revenue of CNY245.9bn, up 19% YoY, with gross profits at about CNY36.8bn.
By the end of 2020, Xiaomi held cash reserves of CNY108bn.
EV and chip ventures
The low profit margins and ultra-competitive nature of the smartphone industry has swayed Xiaomi to diversify its revenue stream. A global chip shortage has hampered production for smartphone manufacturers and car makers alike.
Earlier in March 2021, Xiaomi announced that it is commencing a smart electric vehicle (EV) business.
The EV business will operate under a wholly-owned subsidiary with an initial investment of CNY10bn and an estimated $10bn is expected to be invested in it over the next 10 years, the company said.
During the past few months, there have been sourced-based media reports of Xiaomi’s interest in buying debt-ridden Chinese property developer Evergrande’s EV unit. However, there has been no announcement yet from Xiaomi. Reuters reported that Xiaomi could partner with Chinese automaker Great Wall Motor to make EVs at the latter’s factory under its own brand. Sources told Reuters that Great Wall could provide engineering consultancy services to Xiaomi.
Xiaomi is also keen on becoming a prominent semiconductor chip maker, according to a Weibo post seen by Reuters. Recently, Xiaomi, along with other investors in China, funded a Chinese auto-chip startup, Black Sesame Technologies.
Product lineup
The company’s flagship Mi 11 Ultra 5G starts at around $950 – Apple’s iPhone 13 Pro retails upwards of $999 and Samsung’s Galaxy S21 Ultra 5G comes in at $1,199.
Xiaomi launched a folding phone similar to Samsung’s fold and flip Galaxy Z series. Xiaomi said the price for its Mi MIX FOLD model will start at CNY9,999 ($1,551).
The company’s online store offers its budget Redmi phone series, televisions, laptops, smart watches, air purifiers, smart vacuums, speakers and other home appliances.
Earlier in 2021, Xiaomi announced the launch of its “bio-inspired quadruped robot”, the CyberDog, priced at CNY9,999. The CyberDog is capable of following its owner and can be called on for specific tasks, Xiaomi said.
Xiaomi CyberDog
Xiaomi stock forecast and share price analysis
On 5 October 2021, Xiaomi share price hit HKD20.24, its lowest since 8 October 2020. As of 11 October close, Xiaomi shares rebounded and are currently hovering above one-year lows at HKD21.65.
Xiaomi stock recovered strongly after the Covid-19-induced crash in global equity markets in March-April 2020, the share price rising more than 200% between the end of March and January 2021.
The price peaked at an all-time high of HKD35.90 on 5 January 2021. It then gradually declined as investor sentiment soured in Hong Kong as Beijing stepped up its crackdown on the private sector as a part of a “common prosperity” agenda.
The deterioration in Sino-US relations on pressing topics such as Hong Kong’s autonomy, Taiwan’s independence, labour issues in Xinjiang and fraud charges against Huawei CFO Meng Wanzhou dented investors’ appetite for Xiaomi.
“We see the US-China deal on Huawei's (HW) CFO as a sign of conflict moderation between the two countries, although US sanctions against HW will unlikely change,” said Jefferies.
Considering a longer timeframe, Xiaomi stock is back almost exactly where it was since it’s launch 2.5 years ago, trading just 0.93% up, according to its all-time performance chart.
Xiaomi stock prediction: analysts view
Is the Xiaomi stock buy or sell? Morningstar in its latest report on Xiaomi lifted its fair value estimate to HKD24 from HKD20.70.
Analysts at Morningstar said the rise was due to “increased revenue and gross margin forecasts in the core smartphone business, with the lift in the value of Xiaomi’s investments over the quarter also helping.”
“We believe the balance sheet has been appropriately managed, remaining in a net cash position for the majority of its time as a listed company,” Morningstar said.
“We see this as appropriate for a fast-growing company like Xiaomi which has been investing in new companies and new technologies to grow its ecosystem and remain competitive in the smartphone market. Xiaomi does not pay a regular dividend, which is consistent with the company’s stage of development and growth opportunities.”
Research company Jefferies said: “We believe Oppo, Vivo and Xiaomi have turned less optimistic in their full year shipment target due to continuously weak sell-through in China (limited boost from new model launch and back-to-school demand) and ongoing shortage in 4G SoC still despite strong EM demand into 4Q21.”
“All vendors are fighting hard to secure component supply amid global shortages, but Xiaomi already has its sights set on the next prize: displacing Samsung to become the world’s largest vendor.”
As for Xiaomi’s core smartphone market, the worldwide smartphone market is expected to grow 12% in 2021, according to the latest forecasts from Canalys.
Stanton added: “Going forward though, as supply constraints ease in 2022, the market is set to explode into life. A war has already started, with brands pouring substantial sums of money into showpiece marketing in international markets.”
When looking for Xiaomi share price predictions, bear in mind that analyst forecasts can be wrong. Analysts’ projections are based on making a fundamental and technical study of the company’s performance. However, past performance never guarantees future results. Traders should conduct their own research before making any investment. And never invest more than you can afford to lose.
FAQ
Is Xiaomi stock a buy?
Morningstar, in its latest report on Xiaomi, lifted its fair value estimate to HKD24 from HKD20.70. According to Wallet Investor’s Xiaomi stock forecast 2021-2025, the share price could hit HKD19.92 in one year and plunge to HKD17.92 by the end of the period. These price targets constitute a rather negative Xiaomi share price prediction, given its 11 October 2021 closing price of HKD21.65.
Why has Xiaomi stock been falling?
Weakness in the overall Hong Kong equity market, deteriorating Sino-US relations, US trade blacklist risks and allegations of built-in censorship capabilities in phones have all contributed to Xiaomi's downturn since the beginning of the year.
Will Xaomi stock go up?
Xiaomi managed to show resilient performance during the second quarter of 2021, which might bode well for the stock’s performance. Still, at the time of writing, the stock is 38% down year-to-date.
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