Apple's China rival Xiaomi still has major upside, analysts say, even after record earnings
Chinese smartphone company Xiaomi in the last week reported record net profit for a second-straight quarter, bolstering several analysts' conviction on the Hong Kong-listed stock. In absolute dollar terms, Xiaomi's earnings are still a fraction of Apple's . But the Chinese company has a larger smartphone market share in China , and has built an electric vehicle business, while the iPhone maker dropped its car plans . Apple in recent months has also come under pressure from the Trump administration over its overseas supply chain. Apple shares are down 20% year-to-date to around $200. Xiaomi's have gained more than 45% to 50.95 Hong Kong dollars ($6.50) a share. Following Xiaomi's earnings report on May 27, Jefferies analysts raised their price target to 73 HKD, up from 69.50 HKD previously — for upside of 43% from Friday's close. The analysts attributed the company's earnings beat to outperformance in "AIoT." The category refers to Xiaomi's appliances, which incorporate artificial intelligence functions and can be controlled remotely over the internet using an app. Xiaomi's adjusted net income for the first quarter was 10.68 billion yuan ($1.48 billion), beating the expected 9.48 billion yuan, according to a FactSet analyst poll. Revenue of 111.29 billion yuan also came in above the 108.49 billion yuan predicted by the poll. In smartphones, Xiaomi has become more conservative about the global outlook, but the Jefferies analysts pointed out the company will likely continue to gain market share in the high-end China market with its new Xring O1 chip. Xiaomi officially revealed the chip on May 22 and said it would power its new 15S Pro smartphone, which sells for far less than Apple's iPhone 16 Pro in China. CEO Lei Jun claimed at the event that Xiaomi's Xring O1 Apple's A18 Pro on several metrics, including the ability to operate a game with less heat. Smartphones account for just under 40% of Xiaomi's revenue. Appliances and other products make up nearly 22%. "We believe appliances represent major upside in the next two years, but [Xiaomi's electric SUV] YU7 sales will be [the] key [short-term] catalyst," the Jefferies analysts said. Xiaomi revealed its YU7 SUV at the same May 22 event. While the company didn't announce a price, it said an official launch would be held in July and that the new car would come with a longer driving range than rival Tesla's Model Y. "We believe the launch of YU7, scheduled for July 2025, will likely be the most important catalyst for Xiaomi this year," Morgan Stanley analysts said in a May 27 report. They expect the SUV can garner a higher price point than Xiaomi's SU7 electric sedan that hit the market last year. "If sales volume is strong, it could help Xiaomi achieve higher ASPs, better margins, and ongoing earnings growth," the Morgan Stanley analysts said. They rate Xiaomi overweight and have a price target of 62 HKD. In addition to the YU7 release this summer, several analysts said they are looking forward to Xiaomi's investor day, scheduled for June 3. Those are both potential positive catalysts, Macquarie said. "We believe Xiaomi is a beneficiary of rising EV demand, changing consumer behavior, and industry consolidation in China." "The company is widening its core business product offerings, expanding overseas and controlling [operating expenses] to drive profitability," the report said. Macquarie rates the stock outperform, with a price target of 69.32 HKD. JPMorgan analysts kept their neutral rating, however, as they said Xiaomi's ecosystem-related revenue growth was the slowest among major categories — not supportive of a high valuation in their view. They cautioned that while Apple was able to gain value once services started driving growth instead of hardware, Xiaomi has seen accelerating hardware growth while services has grown more slowly. Their price target is 60 HKD, still about 18% above where the stock closed Friday. — CNBC's Michael Bloom contributed to this report.
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