Barclays lowers Xiaomi's target price to $30 due to rising memory costs

Investing.com - Barclays has lowered the target price for Xiaomi Group ADR shares from previous levels to $30, while maintaining an overweight rating, citing rising memory prices and weak IoT sales as adverse factors for this Chinese tech company.

Memory costs account for 40-50% of the material list for low-end smartphones and 10-15% for high-end models, negatively impacting Xiaomi’s smartphone sales in Q4 2025 and expected to pressure sales in 2026. Barclays states that Xiaomi’s management expects memory prices to remain high until mid-2027, driven by AI-related infrastructure demand, making this semiconductor cycle longer than usual.

The firm has revised down its sales and profit margin forecasts for Xiaomi’s smartphone business. IoT business faces a tough year-over-year comparison in Q4 2025, as it is the first full quarter compared to the baseline when China’s old-for-new subsidy policy took effect. Despite steady growth in export sales, this segment may decline by about 20% YoY.

Barclays expects IoT sales to continue declining YoY until Q4 2026. This segment includes smart home appliances, with about 30% of sales coming from markets outside China that are unaffected by government subsidies.

Xiaomi delivered over 140,000 electric vehicles in Q4 2025. Barclays notes that due to the product mix favoring the YU7 SUV over the higher-margin SU7 Ultra, the gross margin of the EV business may decline sequentially. Rising memory prices also impact the BOM and margins of EVs, but the effect is less significant than on smartphones.

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