Why RLX Technology Bears Were Right Before The Drop

RLX Technology’s latest quarter looked mixed on the surface. Revenue and profit were both higher than a year earlier, yet net margin slipped as costs bit into earnings. Investors who held RLX Technology over the past year are down 26.1%, including dividends. If you had bought around October 2025, expecting analysts’ optimism on reduced-risk nicotine and overseas growth to play out, how should you now judge whether those early assumptions still hold up?

On Simply Wall St, a Narrative is an investor's thesis written down: the reasoning, plus the numbers it rests on. Run those numbers and you get an estimated Fair Value.

The easy part of this move is behind RLX Technology. Zero in on 33 high quality undervalued stocks for companies trading below our estimates.

The Two RLX Technology Stories Investors Were Weighing

The shares cost US$2.39 at the start of the period, and RLX Technology sat between two very different but reasonable stories about its future.

On the bullish side, one narrative put Fair Value at US$3.04. This view was built on the idea that a global move toward reduced risk nicotine products would support 26.3% annual revenue growth and a 17.9% profit margin assumption after three years.

The more cautious view saw Fair Value at US$2.26 and focused on tightening vaping rules in China and overseas, with regulatory pressure seen as a key threat to long term revenue potential.

What The Results Changed For The RLX Technology Thesis

The biggest new fact is that Q2 2026 revenue reached ¥916.89m while net income was ¥217.75m, and management pushed hard into Europe and oral nicotine pouches. That supports the optimistic global expansion story. Net margin slipped from 27.3% to 23.7% and Q2 2026 earnings per share missed expectations, which backed the cautious view on profitability. Overall, the evidence cut both ways.

The lesson is simple. When a thesis leans on overseas growth and margin resilience, keep checking how much revenue comes from new regions and whether profit share keeps pace with sales.

What RLX Technology’s Lower Price Now Asks You To Believe

RLX Technology trades at US$1.7 today, after a 26.1% loss over the past year from US$2.39. The selected narrative sees fair value above that level and anchors its case on international scale, manufacturing assets and a large net cash position.

The key assumption is that RLX turns a majority overseas revenue base and new production hubs into a steadier, higher quality earnings mix under tighter regulation.

"The main factor that has to go right is that RLX turns its now majority international revenue base, European distribution platform and Southeast Asia manufacturing hub into a durable, higher quality earnings mix despite tighter regulation and lower margin downstream businesses."

Not everyone reads the same price the same way. → See the higher figure this Narrative lands on, and how it gets there

Go Straight To The Source

Passing on this one could have spared you a loss. Where might you find the opposite surprise? Start looking for companies whose prices leave room for a better outcome than investors expect. These three trade below our estimated value.

• Company 1 - 46% below our estimate - converts a record backlog of tech heavy construction projects into recurring service work.
• Company 2 - 32% below our estimate - supplies GPUs and AI software that data centre customers standardise on for training workloads.
• Company 3 - 42% below our estimate - sells specialist science and engineering advice for products facing complex regulation and litigation.

That is three of the list. See all 25 companies with the balance sheet to back it up →

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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