Xiaomi's Margin Squeeze and EV Reality Check: A Stock in No Man's Land

Xiaomi's stock falls 24% despite HSBC and Goldman Sachs buy ratings, as smartphone shipments drop 19% due to memory cost surges and EV sales decline sharply.

Xiaomi has become a study in contrasts. While investment banks like HSBC and Goldman Sachs talk up the company's prospects — HSBC recently lifted its price target to 54 Hong Kong dollars with a buy rating — the market is voting differently. The stock trades at roughly 3.42 euros, a decline of nearly 24 percent since the start of the year, and sits well below both its 50-day moving average and the 52-week high of 6.69 euros. The gap between analyst optimism and trading reality has rarely been wider.

The root of the sell-off is twofold, and neither factor is new. On the smartphone side, Xiaomi's core business is being hammered by a surge in component costs. DRAM and NAND memory prices jumped around 90 percent in the first quarter, according to Counterpoint Research, and the company's heavy exposure to the price-sensitive entry-level segment makes it nearly impossible to pass those increases on to consumers. As a result, global smartphone shipments fell 19 percent in the opening quarter. That is a steeper decline than at either Apple or Samsung, even though Xiaomi held onto its number-three global ranking. Management has responded by pushing higher-margin premium models: sales of premium smartphones rose a quarter last year to just over 13 million units, but the question is whether that is enough to offset the component headwind.

Meanwhile, the electric-vehicle division is generating plenty of buzz but also raising doubts. The new YU7 GT — a 990-horsepower crossover with a top speed of 300 km/h — is set for an official unveiling in late May in a striking burgundy red. Xiaomi is positioning it as a sporty touring SUV, with a projected price between 450,000 and 500,000 yuan. Yet the vehicle arrives at a tricky moment. Sales of the regular YU7 have fallen sharply from a peak of roughly 39,000 units delivered in December to just 13,500 in March. The GT variant is meant to reverse that slide, but the market is waiting for tangible orders before buying into the story.

On the operational side, Xiaomi is methodically building a European footprint. Its new R&D center in Munich, led by former BMW engineer Rudolf Dittrich, now employs around 50 engineers and designers who have worked at Porsche, Lamborghini, and Mercedes-Benz. The YU7 GT has also completed test runs on the Nürburgring Nordschleife. A broader management reshuffle for overseas operations includes a former Tesla factory manager. The company still plans to enter the European market in the second half of 2027. For the current year, the delivery target stands at 550,000 vehicles — up from roughly 410,000 last year — and Xiaomi had already handed over an estimated 109,000 cars in the first four months alone.

The stock market, however, remains unimpressed. Trading below its 50-day line and near the year's low, the shares are a long way from the highs of 2025. The next catalyst could come on May 26, when Xiaomi reports first-quarter earnings. The numbers will reveal whether the push into premium smartphones has truly cushioned the blow from memory-cost inflation, and whether the YU7 GT can generate enough pre-orders to revive EV momentum. Until then, the bulls at HSBC and Goldman Sachs are betting against a very skeptical tape.