Li Auto is forming a cup with handle that has a buy point of 42.35, according to IBD MarketSmith. The growth stock is today's selection for IBD 50 Stocks To Watch.
Shares fell and tested the 50-day moving average even after earnings beat views on Nov. 9. The stock then rebounded and went on to form a handle. News that the Chinese EV maker will start mass production of its first fully electric car in February has helped lift the stock.
Li has also been rising as new-energy vehicles sales and promotions drove China auto sales in October up 10% from the prior year. The Tesla rival also stands to benefit from its popular hybrid model that uses both gasoline and electric motors.
The growth stock boasts a 57% gain so far this year, trouncing the S&P 500's gains.
Li has strong IBD ratings. Its Composite Rating is nearly ideal at 98, while the EPS Rating is 81. Li has been performing better than a majority of stocks in the IBD database and has a Relative Strength Rating of 96.
Growth Stock Shows Strong Institutional Interest
Li's sales growth has been accelerating over the past four quarters. Third-quarter sales of $4.7 billion grew 262%. Earnings have been tracking higher as well. The company earned 45 cents a share vs. a year-ago loss. The company exited the quarter with free cash flows of $1.81 billion compared with negative free cash flow in the prior year quarter.
Vehicle sales of $4.61 billion rose 271.6% from the third quarter 2022. For the fourth quarter, the company expects to deliver 125,000-128,000 vehicles, which would be an increase of 169.9% from the prior year, with revenue of $5.34 billion at the midpoint. That would suggest an increase of 121%.
Li Auto went public in July 2020 and its American depositary receipts surged over 50% from its initial listing price of 11.50 on the first day of trading on the Nasdaq.
Li ranks second in IBD's auto manufacturers group. It boasts an Accumulation/Distribution Rating of B-.
Among top funds, Fidelity Contrafund (FCNTX) holds its shares. Exchange traded funds holding the growth stock include Invesco Golden Dragon China ETF and the SPDR S&P Kensho Smart Mobility ETF.
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