On May 10, Li Auto (NASDAQ: LI), the Chinese electric vehicle (EV) manufacturer, posted better-than-expected earnings results. Despite beating estimates, the shares did not perform well as anticipated the resurgence of the Covid 19 pandemic hurt auto production and sales.
Li Auto earned roughly $1.5 billion in sales, and earnings per share (EPS) were 3 cents, while the profit margins remained flat despite rising costs, supply chain issues, and the more recent Covid lockdowns in China.
On that note, the CEO Xiang Li, in the company’s news release, stated:
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“We sincerely appreciate our users’ consistent support, which, combined with our self-discipline for efficient operations, continued to drive robust financial performance in the first quarter of 2022 and ensured the scale and pace of our investments in research and development.”
LI stock performance and analysis
Year-to-date (YTD), the shares are down over 25%, with the actual sell-off starting in December of 2021. In the last trading session, the shares crossed the 50-day Simple Moving Average, indicating that more price recovery could be had. Volume increases have been noticed as well, which could support the thesis of a change in momentum.
In consequence, analysts agree that the shares are a ‘strong buy,’ predicting that the average price for the next 12 months could reach $38.57. This price is 60.71% from the current trading price of $24.
Possible recovery in spite of risks
On May 17, Chinese auto stocks jumped on hopes that the worst was is behind the sector, as Shanghai officials mulled gradually reopening from stringent lockdowns from June 1, onwards. Even so, Chinese electric vehicle stocks have taken an additional blow since the U.S. government is considering delisting a number of country’s firms from their stock exchanges.
Other Chinese competitors have already taken precautionary steps, like Nio’s recent listing in Singapore.
Despite market juggernauts like Tesla (NASDAQ: TSLA) accounting for 60% of all EV deliveries, a report by Finbold showed that Li is in 5th place in terms of deliveries behind auto stalwarts like Volkswagen (ETR: VOW3) and BMW (ETR: BMW).
The company anticipates that it will provide anywhere between 21,000 and 24,000 EVs during the second quarter of the year. While investors are eagerly awaiting the introduction of the brand-new line L9 in Q3.
If the company manages to beat delivery expectations for May and June, the stock price could fly as it would show strength despite supply chain challenges and lockdowns.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
