Xiaomi share price stuck in a bear market as memory shortage bites

Xiaomi share price has retreated and moved into a bear market this year. It has slumped into a bear market, moving from last year’s high of H$61.45 to the current $35. It has retreated by over 43%, a move that has erased billions of dollars in value.

Xiaomi is contending with the memory chip shortage

Xiaomi stock price has retreated sharply in the past few months as it faces some major challenges. One of the main challenges is the ongoing memory chip shortage, which will lead to a slump in smartphone sales.

A report released by IDC showed that smartphone sales are expected to continue falling this year. That report expects that shipments will drop by nearly 13% this year, a move that will impact top companies in the industry, including Xiaomi.

At the same time, Xiaomi will now have to pay more for memory, a move that will make some of its devices unaffordable to most customers. IDC noted that:

“​​Most low‑end–focused OEMs plan to defend share by cutting specifications or shifting volume above $200, but demand in that range remains limited across emerging markets, making it impossible to sustain current shipments.”

Therefore, analysts are scaling down their estimates for Xiaomi’’s growth path this year, which is affecting its stock performance. 

EV business is facing risks and opportunities

The stock is also retreating because of its EV business, which has done well in the past few months. For one, there are safety concerns, especially after a a major accident that happened last year.

While Xiaomi’s EV is gaining market share, there are broad concerns about China’s EV industry as competition rises. This competition is coming from top brands like Nio, Li Auto, and XPeng.

On the positive side, there are hopes that the company will become a major EV seller in the US. According to the Financial Times, it is now in talks with Ford, a deal that will see it manufacture and sell its EVs in the country. The US is the second-biggest auto market in the world after China.

The next main catalyst for the Xiaomi stock price will be its upcoming financial results, which will come out in March. Analysts expect these numbers did well as smartphone sales jumped in the fourth quarter. Its guidance, however, will likely be weak because of the woes in the memory chip industry. 

The most recent results showed that Xiaomi’s revenue rose by 32.50% in the first nine months of the year to over RMB 340 billion. Its profit for the period jumped by 140% to over RMB 35 billion. 

Xiaomi share price technical analysis

The weekly timeframe chart shows that the Xiaomi stock price has slumped in the past few months. It has dropped from a high of $61.45 in June last year to the current $35. This retreat also happened amid the ongoing profit-taking.

The stock has now slumped to the 50% Fibonacci Retracement level. At the same time, the 50-week and 100-week Weighted Moving Averages (WMA) are about to form a bearish crossover.

The Relative Strength Index (RSI) and the MACD have continued falling. Therefore, the stock will likely continue falling as sellers target the key support at $30. It will then bounce back, possibly in March when it publishes its results. 

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