Xiaomi Shares Face Mounting Headwinds Amid Strategic Shifts

Xiaomi KYG9830T1067

The Chinese technology conglomerate is ending the week navigating a complex news environment that is prompting investor caution. A skeptical analyst note has introduced fresh uncertainty, even as company leadership projects confidence through share buybacks and a new pricing strategy for its electric vehicles. The central debate for the market is whether expanding margins in the EV sector can offset a potential slowdown in Xiaomi's core smartphone operations.

The most direct pressure on the stock came from a revised assessment by Jefferies. The firm's analyst, Edison Lee, downgraded the rating from "Buy" to "Hold" and significantly reduced the price target from 49.21 Hong Kong dollars to 43.36 HKD. This cautious stance is rooted in a pessimistic outlook for the smartphone industry in 2026.

Jefferies forecasts a market volume contraction exceeding 11%, citing a lack of genuine innovation and increasingly saturated markets. A specific cost headwind poses a particular threat to Xiaomi: rising prices for memory chips are pressuring gross margins. Because the company maintains a strong presence in the price-sensitive segment under $200, these increased costs impact its bottom line more directly than they would for premium competitors. Analysts warn of potential margin compression of up to 5 percentage points.

Operational Moves and Technical Position

The operational crosscurrents are reflected in the stock's chart performance. Following a corrective phase, the shares closed yesterday at 4.43 euros. This price level represents a significant retreat from the 52-week high of 7.07 euros and places the stock approximately 20% below its long-term 200-day moving average of 5.59 euros.

Management is actively working to counter this trend. On December 18, the company repurchased an additional 3.8 million of its own shares. This move is complemented by the launch of a new, efficient AI model named "Xiaomi MiMo-V2-Flash," designed to strengthen ecosystem loyalty.

A Bold New Pricing Strategy for EVs

Concurrently, Xiaomi is making a bold strategic pivot in its electric mobility division. Industry reports indicate that the planned facelift for its successful SU7 model, scheduled for the second quarter of 2026, will feature significant technical upgrades and a substantially higher price tag.

The planned increase of approximately 20,000 RMB (about 2,800 USD) signals a strategic departure from competing purely on price. This move positions the SU7 almost directly against the Tesla Model 3 in terms of cost. While this demonstrates confidence in the brand's appeal, it carries the risk of lower sales volumes in China's volatile domestic market. The company is now clearly prioritizing profitability over pure market share gains—a shift investors typically favor in the medium term, though it introduces short-term uncertainty.

Market Reaction and Forward Look

For the week, Xiaomi's stock declined by 4.20%, trading below key technical averages. Market participants are now shifting their focus toward confirmation of the new EV pricing strategy and the upcoming December sales figures, expected in early January.

The crucial factor for the stock's future trajectory will be Xiaomi's ability to cushion any forecasted weakness in smartphone sales with higher profitability from its growing electric vehicle business. If bullish investors fail to defend the technical support level around 40 HKD on its home exchange in a timely manner, the current correction could extend further.