Trying to predict the way that a particular stock is going to perform is probably one of the more difficult things that you will ever learn how to do. Truth be told, it’s difficult for the experts to do it with any real level of accuracy. If that’s the case, how are you supposed to know what to purchase as a long-term investment and what to leave alone when you have a job that is completely unrelated to purchasing stocks and you’re just trying to make a little extra money in your portfolio? For the most part, you follow the advice of the experts and you do an endless amount of research, hoping to find a stock that market analysts more or less agree on. Sometimes, the things that seem most certain turn out to be a bust and the ones that people are more skeptical of end up doing great. One stock that has been interesting as of late is Xpeng, a Chinese electric vehicle company that has only been in business for a short while. Traded on the stock market as XPEV, this is a stock that definitely got a big dose of reality earlier this year as it got kicked around quite a lot. However, its earnings are now looking up. Does that mean it’s a good long-term investment or is it nothing more than a waste of money?
Outside of the Buy Zone
According to a lot of market experts, this particular stock is showing signs of being a decent performer, but that doesn’t necessarily mean that you should run out and purchase stock in the company as a long-term investment. That’s largely because the stock has moved out of what analysts like to call the buy zone, meaning that you’re likely to pay more money for the stock than you can realistically expect to make back within the next 12 months. For example, if you pay $48 per share and the stock tops out at $50 per share, you won’t be able to make a significant profit within the next 10 to 12 months. Of course, it could always soar well beyond the $50 mark, just as it could drop down to almost nothing. That said, almost all of the stock market experts agree that its current price per share and what many of them consider to be the top market value within the next 12 months or so are so close together that it would simply be impractical to purchase any of this stock with the intention of using it as a long-term investment. If that’s not enough to dissuade you, it’s also worth noting that the entire EV sector has been rather volatile in the stock market lately. This particular company has watched its stock soar into the stratosphere, only to crash and burn a few months later. In addition, other electric vehicle stalwarts such as Tesla have been having trouble in the stock market. It leads one to believe that others in the same line of work will also experience problems. In fact, those problems could be far more significant, as Tesla has been in business long enough to have developed a name for itself.
Growth vs. Profitability
One of the things that many analysts are quick to point out is that this particular stock seems very solid as far as its potential for growth is concerned. That said, it doesn’t necessarily seem to be showing those same signs when you’re talking about its potential for profitability. Clearly, you’re not making any money if you purchase shares in a stock that is capable of growing without making any money. Remember, the cardinal rule of trading in the stock market is that your stocks have to make money in order for you to make money. In this particular case, it looks like the company is growing at a respectable pace. That said, the general market volatility that surrounds electric vehicle companies at the moment, coupled with the fact that their purchase price for shares of stock is almost maxed out at the moment, means that there isn’t a lot of room for any type of profit to be made at the moment. This doesn’t necessarily mean that things will stay that way. As a matter of fact, it’s highly likely that the stock will eventually sort of reset itself in a different category with the base numbers that are currently in the upper echelons of performance. As such, the stock can then become more profitable. However, no one really knows if that’s going to be how things go or not because everything has a tendency to change at a moment’s notice. In order to make sure that you don’t end up with a bunch of stuff that you can’t sell and therefore can’t make money from, it’s important not to get hung up on things like this where you end up purchasing shares in bulk when it serves no purpose but to cost you money.
There Are Others Stocks That Might Perform Better
At the end of the day, it’s important to remember that you’re not investing merely for the fun of it, but also to achieve the goal of having more money after you retire. Obviously, you want to choose something that’s going to work well for you in that respect. Most analysts agree that this particular stock may not be the best option for anyone looking to make a long-term investment over the course of the next several months. That’s largely because of all of the aforementioned reasons, along with the fact that the market trend shows that the demand for electric vehicles will continue to be just as volatile as it has been in the past for at least another year. That means that you might purchase shares in the stock and make a great deal of money, but it means that you might also lose the overwhelming majority of the money you’ve invested without being able to make it back. At the end of the day, the choice is yours. That said, it doesn’t make a lot of sense to use this particular stock as a long-term investment because it’s very much removed from even resembling a sure thing. There are plenty of other stocks that are likely to perform better and that’s the bottom line.