Smartphone Maker Xiaomi Drops After Q3 Results

Xiaomi Corporation

Xiaomi is a Chinese consumer electronics and smart manufacturing company, mostly known for its smartphones, with its products being available in more than 100 countries and regions around the world.

It was founded in April 2010 and has been listed on the Main Board of the Hong Kong Stock Exchange, since July 9, 2018. ^[1]

The firm has been able to take advantage of rival Huawei's demise and increase its revenues and market share, but competition has increased lately.

As per Canalys, Xiaomi had risen to the No2 spot in the global smartphone market in Q2 ^[2], surpassing Apple, but gave that position back in the third quarter, dropping to the 3rd place ^[3].

Its standing deteriorated in the Chinese market as well, since it ranked 4th, having been surpassed by Honor – Huwaei's spin-off brand ^[4].

Despite these headwinds, the smartphone maker ploughed through with the New Retail business model and hit a new milestone: the opening of its 10,000th store in mainland China ^[5].

Q3 Results

The firm released its latest quarterly results on Tuesday , after the Hong Kong stock market closed, largely disappointing investors.

For the three months ended in September 30 2021, it generated Revenues in excess of RMB 78 billion, which constituted an 8.2% year-over-year (y/y) rise, but a drop of 11.1% compared the previous quarter (q/q).

The core Smartphone business was responsible for more than half of total revenues, generating RMB 47.8 billion, which once again was lower than the prior quarter.

Smartphone shipments decreased 5.8% from 46.6 million in the third quarter of 2020 to 43.9 million in the third quarter of 2021, with the firm citing "global supply shortage of key components" as the main culprit.

On the bright side, Xiaomi broadened its user base, noting that "for many of our new smartphones launched this year, over half of the users are new Xiaomi users".

Beyond Smartphones

Xiaomi has entered the Electric Vehicle (EV) arena, announcing back in September that Xiaomi EV Company Limited has completed the business registration with a registered capital of RMB 10 billion ^[7].

On Tuesday it commented on the EV push, saying that it has built a team of more than 500 people and aims to launch mass production of its smart electric vehicles in the first half of 2024.

During the reported quarter, the company unveiled a pair of Smart Sunglasses expanding its wearable devices offering ^[8] and made its entry into Robotics, by unveiling a Cyberdog ^[9].

Stock Movement

Xiaomi had impressed with its stock performance in 2020, which culminated in record highs (35.91) in the first month of 2021, but the current year has been disappointing, with losses of around 35% during the first nine months.

Tuesday's results were not bad, but marked - for the most part - a slowdown compared the previous quarter, disappointing investors and pushing XIAO.hk to its lowest level since August 2020.

As such, it closed below 61.8% Fibonacci of the "2020 low/2021 high" rise which opens the door for further decline towards the 15.00 area, with the first potential support provided at 17.35.

On the other hand, the Relative Strength Index points to oversold conditions and a bounce back above 20.00 would not be surprising, although a catalyst will be required for gains above the EMA100 (at around 20.50-21.00) that will pause the downward momentum.