Is Li Auto Stock a promising bet for long-term investors?

Li Auto, Inc. based in China (NASDAQ: LI) is engaged in the design, production and sale of intelligent electric vehicles (EV). The company launched its first Li ONE model, a smart electric SUV, in May last year. It started manufacturing the six-seater e-SUV in large numbers in November 2019. In addition, the company plans to add battery electric vehicles (BEVs) and extended range electric vehicles (EREVs) to its portfolio. .

Founded in 2015, Li Auto listed on Nasdaq in July 2020 and raised $1.1 billion through an initial public offering (IPO). After listing, the stock price continued to rise and reached an all-time high in November 2020. Thereafter, LI started to decline and reached $15.98 in May last year.

The company, with a market capitalization of $25.29 billion, announced its first quarter results last month. Let’s take a closer look at its performance.

Q1 results

On May 10, Li Auto announced better-than-expected financial results for the first quarter of 2022. Earnings came in at $0.07 per share, compared to Street’s estimate of a loss of 0. $0.07 per share and the loss of $0.06 per share a year ago. to share.

Total revenue jumped 167.5% year-over-year to $1.51 billion, and vehicle sales rose 168.7% to $1.47 billion. Other sales and services increased 127.2% to $40 million.

Vehicle deliveries climbed 152.1% to 31,716 units, and gross margin rose to 22.6% from 17.3% in the first quarter of 2021.

The CEO’s point of view

Founder, Chairman and CEO of Li Auto, Xiang Li, said: “While the recent resurgence of the pandemic and associated supply chain disruptions have been difficult for our industry and uncertainty remains in the future close, we are confident in the resilience of our organization. .”

“Despite recent pandemic-related bumps in the road, we are moving forward with our plan to begin deliveries of our second model, the L9, in Q3. The L9 is a flagship smart SUV for family-based users. on our next-generation EREV platform, delivering best-in-class performance, security and intelligence,” Li added.

Orientation Q2

For the second quarter, the Beijing-based company forecasts total revenue of between $972.3 million and $1.11 billion. Additionally, vehicle deliveries are expected to range from 21,000 to 24,000 units.

Meanwhile, analysts expect Li Auto to post a loss of $0.08 per share in the second quarter of 2022.

Stock Valuation

Following the release of the company’s first quarter results, Tiger Securities US analyst Bo Pei maintained a buy rating on the stock with a price target of $40 (upside potential of 52.6 %).

Pei said, “Overall, despite short-term supply chain issues, we are encouraged by Li Auto’s gross margin improvement. With the restoration of the supply chain and new models, growth should reaccelerate in the second half.

Overall, the stock has a Strong Buy consensus rating on TipRanks based on six buys. LI’s average price target of $38.33 implies upside potential of 46.2% from current levels.

Blogger position

According to TipRanks, financial bloggers are 95% bullish on LI, compared to an industry average of 67%.

Hedge Funds on TipRanks

TipRanks’ Hedge Fund Trading Activity Tool shows that confidence in Li Auto is currently very positive, as the cumulative change in holdings in the four hedge funds that were active in the last quarter was an increase of 12 million shares.

Conclusion

Even though LI stock has lost 14.1% in the past six months, the electric vehicle industry is set to grow over the long term as more countries turn to vehicle electrification to reduce their footprint. carbon.