XPEL, Inc. (XPEL): An Undervalued Leader in EV Protection and Global Aftermarkets

XPEL, Inc. (NASDAQ: XPEL) is a stealthy growth story in the automotive aftermarket sector, poised to capitalize on secular trends in electric vehicles (EVs), global expansion, and product diversification. Despite near-term headwinds in select markets, the company's robust financials, strategic partnerships with EV leaders, and compelling valuation metrics suggest it's a compelling buy for investors willing to look beyond short-term volatility.

Financial Strength Amid Expanding Markets

XPEL's Q1 2025 results underscore its momentum:
- Revenue grew 15.2% YoY to $103.8 million, driven by surging demand in key regions like China (459% growth) and the U.S. (11.6% growth).
- EBITDA expanded 23.2% to $14.4 million, while net income rose 28.8% to $8.6 million, reflecting operational efficiency.
- The company returned $50 million to shareholders via a buyback program, signaling confidence in its cash flow.

Strategic Partnerships: Riding the EV Wave

XPEL's partnerships with EV pioneers like Rivian and Tesla are a key differentiator. For Rivian owners, XPEL's Paint Protection Film (PPF) and window films are now directly accessible via Rivian's Gear Shop, offering:
- ULTIMATE PLUS PPF: Self-healing, UV-resistant protection for high-wear areas.
- STEALTH PPF: A matte finish for Rivian's Darkout-trim vehicles, enhancing both aesthetics and durability.
- PRIME Window Films: Blocking 99% of UV rays, with customizable tints for privacy and heat rejection.

Similarly, Tesla owners can now order XPEL's PRIME films directly, aligning with Tesla's focus on premium, low-maintenance vehicles. These programs tap into the growing EV aftermarket, where protective products are critical for maintaining resale value and durability—especially for off-road enthusiasts.

Global Expansion: Beyond Tariff Concerns

While tariffs and a 14.9% decline in Canadian revenue pose risks, XPEL's geographic diversification is a major advantage:
- China: Supply chain improvements drove revenue to $8.1 million (+459% YoY), a market XPEL is now strategically aligning “sell-in” with consumer demand.
- Middle East/Africa: Achieved record revenue of $5.9 million, up 14.9%, reflecting strong adoption of protective films in harsh climates.
- Asia Pacific: Grew 33% YoY, highlighting pent-up demand for automotive protection solutions.

The company's DAP software and network of certified installers also support scalable operations in these regions, mitigating some tariff-related risks through localized partnerships.

Valuation: A Discounted Growth Story

XPEL's valuation appears undervalued relative to its growth trajectory:
- P/E of 21.55 vs. 30+ for peers like Tesla (TSLA) and Rivian (RIVN).
- EV/EBITDA of ~10x (based on $1.02B market cap and $73M annual EBITDA), far below EV peers.
- P/S of 2.4x, reasonable for a company growing revenue at 15%+ annually.

Risks to Consider

• Tariff Uncertainty: Global trade tensions could disrupt supply chains, though XPEL's regional manufacturing partnerships (e.g., in China) may buffer this.
• Canadian/Latin American Declines: Weakness in these markets must be offset by faster growth elsewhere.
• Operating Leverage: The 14.4% rise in expenses could pressure margins if revenue growth slows.

Investment Thesis: Buy the Dip

XPEL is a buy at current levels, with a target price of $55 (based on analyst consensus and EV/EBITDA expansion to 12-13x). Key catalysts include:
1. Upcoming Q2 2025 results (est. $118M revenue), which may validate growth momentum.
2. SEMA Show 2025: Potential new partnerships or product launches to further solidify its EV play.
3. Stock Buyback: Reducing shares outstanding while undervalued.

While risks like tariffs and regional headwinds linger, XPEL's dominance in protective films, EV partnerships, and global scale make it a rare value in the high-growth automotive space. Investors should accumulate positions on dips below $40, with a long-term horizon aligned to EV adoption and aftermarket demand.

Final Verdict: XPEL (XPEL) is a hidden gem in the EV and automotive aftermarket sectors. Its undervaluation relative to growth, strategic partnerships, and diversified revenue streams position it as a buy for patient investors.