On Wednesday, Morgan Stanley reiterated its confidence in XPeng Inc. (NYSE:), maintaining an Overweight rating and a $18.00 price target on the electric vehicle manufacturer shares. The firm’s optimism is based on several factors that are expected to influence the company’s performance in the near term.

The recent decline in XPeng’s share price has led to a more attractive short-term valuation, which could be a catalyst for growth. Morgan Stanley anticipates that the market has already accounted for XPeng’s lower first-quarter volume, which should not significantly impact the stock moving forward.

Looking ahead, the firm predicts a recovery in sales volume starting in the second quarter. Additionally, forthcoming updates on XPeng’s partnership with Volkswagen (ETR:), advancements in advanced driver-assistance systems (ADAS), and the launch of new models under the MONA brand and the P6 are likely to provide a solid foundation for the stock’s movement.

Morgan Stanley estimates a 70% to 80% probability, described as “very likely,” for this positive scenario to unfold. This assessment is based on the firm’s subjective evaluation of the likelihood of these events positively impacting XPeng’s share price within the next 45 days.

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