All eyes were on mega-cap EV giant Tesla (TSLA) and its Q3 earnings report this week, but Chinese startup Li Auto (LI) broke out to its own very respectable 5-day gain of 14%. With a market cap of about $29 billion, LI stock is still down more than 20% on a YTD basis, but has now rallied more than 65% from its 2024 low of $17.44, set as recently as late August.
The strength in Li Auto comes as reports indicate that both China and the European Union (EU) are seeking alternatives to the EU’s proposed tariffs on Chinese EVs. Despite broader economic challenges in China, Li Auto's stock has also risen in anticipation of additional economic stimulus measures, as Beijing considers EVs critical to the economy’s growth.
Li Auto's newly announced collaboration with Qualcomm (QCOM) to integrate advanced automotive chips highlights its commitment to technological advancement and future-ready vehicles. However, it’s worth pointing out that Li’s earnings have been under pressure due to its increased investments in technology and expansion, impacting profit margins.
The company's recent financial performance is encouraging, with a significant year-over-year increase in vehicle deliveries contributing to robust revenue growth. That said, Li’s valuation metrics suggest it is trading at a premium compared to its industry peers, which indicates heightened expectations for its future performance.
Analysts have mixed views, with some optimistic about Li Auto's growth potential, while others remain cautious due to global economic uncertainties and stiff competition within the EV sector. The consensus rating among 13 analysts is a “Moderate Buy,” with the mean price target of $35.10 indicating expected upside of about 22%.
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On the date of publication, Edited by Elizabeth Volk did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
