Goldman: betting on Xiaomi stock to fall has become the consensus among hedge funds. What's wrong?

Hedge funds are increasing their bets against Xiaomi shares due to growing concerns ahead of the publication of the Chinese manufacturer of electric cars, smartphones and other electronics, Goldman Sachs warned. Investor sentiment has been adversely affected by concerns about the safety of the company's vehicles, production problems and weak demand. The company's shares have risen by a quarter since the start of 2025.

The volume of short positions on Xiaomi shares in Goldman Sachs' client portfolio rose 53% over the past week, Bloomberg reported, citing a November 5 note from the bank's client department. That volume reached $447.68 million, according to data cited by Intellectia. The bank noted that the flows of orders requiring customized support have seen an increase in sales over the past two weeks, mostly from pension and hedge funds, Bloomberg reported.

According to hedge fund feedback, Xiaomi is a "consensus idea to short or sell, at least in the short term, due to the lack of [growth] catalysts," Goldman Sachs analysts wrote in a Bloomberg note.

Investor sentiment toward Xiaomi has deteriorated sharply compared to the beginning of 2025, when optimism about the company's entry into the electric car market contributed to the growth of shares, writes Bloomberg. Relative to the record set in early July, the company's securities fell by more than 25%. Quotes are negatively affected by safety concerns, delays in production and low demand for its electric cars, despite recent promotions, the agency notes. The downward trend was exacerbated after a fatal traffic accident in October, triggering the sharpest collapse in Xiaomi shares since April.

Hong Kong-traded Xiaomi shares are up 25.9% since the start of 2025. Analysts at Goldman Sachs recently lowered their target price on Xiaomi shares by more than 10%, citing, among other things, possible problems with the company's profitability due to rising prices for components - memory chips, Bloomberg reported.

The cooling is also noticeable in the market as a whole, according to FactSet data. Over the past month, the consensus rating of Xiaomi shares formed by the service changed from "Buy" (Buy) to "Overweight" (Overweight) - a less confident recommendation to buy.

Xiaomi is scheduled to report third-quarter results on Nov. 18. According to Bloomberg's consensus forecast, Wall Street expects revenue growth of 23% year-on-year.

This article was AI-translated and verified by a human editor