Jefferies downgrades Xiaomi to underperform, cuts target to HKD25.49

Jefferies downgraded Xiaomi Corp. to underperform from hold, cutting its price target 5.5% to HKD25.49 on weak first-quarter earnings and mounting pressure in its smartphone and electric vehicle businesses.

The 1Q26 results missed expectations at the EBIT level, Jefferies said in a report. Revenue and gross margin were broadly in line, but earnings before interest and taxes plunged 70% year over year, falling 16% below Jefferies' estimate and 44% below consensus. The miss stemmed from negative operating leverage as smartphone and AIoT revenue declined, combined with a 33% increase in research and development expenses.

Xiaomi's EV revenue grew only 8% in the quarter, constrained by the model transition of the SU7 and slower sales of the YU7. Management maintained its 2026 EV delivery target of 550,000 units, but Jefferies lowered its forecasts to 495,000 units for 2026 and 880,000 units for 2027. On the smartphone side, the company reaffirmed guidance for a 10% revenue decline and an 8% gross margin in 2026, though Jefferies noted that roughly 60% of handset shipments come from models priced below USD200, and price increases on mid- to high-end models are insufficient to offset rising memory costs.

The new target price implies a 14% downside from the prior session's close. Xiaomi shares fell 4.6% on the day, with short selling accounting for 28.9% of turnover. The downgrade adds to bearish sentiment around the stock, which faces elevated market expectations and valuation pressure in its EV segment. Investors will watch for monthly delivery data and any update on smartphone margin trends in the coming quarters.

This article is for informational purposes only and does not constitute investment advice.