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LI Stock Outlook: One Chinese EV Maker Worth Betting On

EV maker Li Auto (NASDAQ:LI) sustained robust growth in October with 40,400 deliveries. This showed a 10% monthly increase and a 300% surge from October 2022. Despite a 20% rebound from their Oct. 19 low, shares hover around 20% below all-time highs seen this August, when shares hit $46.65.

The suppressed valuation may stem from concerns about the Chinese economy. Despite this, deliveries should keep growing doe the EV maker, with the IMF projecting a 5.4% expansion in 2023 and 4.6% in 2024. Analysts foresee a notable increase in earnings per share, rising from 75 cents in 2023 to an estimated $1.36 in 2024.

Q3 Earnings Report Released

Li Auto outpaced revenue predictions in its Q3 earnings report on Nov. 9, driving a 3% stock increase. The company achieved Q3 revenue of $4.75 billion, marking a substantial 271.3% year over-year growth. CEO Xiang Li emphasized adapting to market demand by strengthening synergies in production, supply, and sales.

Smart electric SUVs fueled strong sales for Li Auto, with added services like charging stalls and vehicle internet connections gaining traction. In Q3, the company delivered 105,108 units, a 296.3% year-over-year surge. CEO Xiang Li proudly declared Li Auto the first emerging new energy automaker in China to achieve 500,000 cumulative deliveries.

Beyond the earnings report, Li Auto delighted shareholders with a remarkable 92.9% year-to-date stock return, surpassing the S&P 500’s 15.7%.

CEO Xiang Li expressed optimism for Q4, anticipating deliveries of 125,000 to 128,000 vehicles and total revenues around $5.27 billion to $5.4 billion. These projections signify impressive growth, with increases ranging from 117.9% to 123.1% compared to Q4, 2022.

Li Xiang is Among China’s Richest

Li Xiang, the founder of Li Auto, has achieved success in China’s competitive EV market with family-friendly hybrid SUVs. The strong demand led to a significant increase in the company’s share price, bringing Li back to China’s 100 richest list at No. 34 with a net worth of $7.4 billion. 

In September, Li Auto became a leading seller of new energy vehicles in China, delivering 36,000 cars, a threefold increase from the previous year. In Q2, sales exceeded $3.9 billion, turning a profit of $319 million, a significant improvement from the $95.7 million loss a year ago. China Securities Journal stated that Li Auto aims to achieve an annual delivery of 1.6 million cars by 2025.

Li Auto is navigating a shift to full electric vehicles, abandoning gas-powered engines in its upcoming Li Mega MPV, targeting the luxury market. Priced above $70,000, the model will launch later this year. To expedite its transition, Li Auto plans to establish 3,000 charging stations nationwide in two years, with 100 operational by September’s end. Despite challenges in the competitive electric vehicle market, the company emphasizes the need for swift development in this space.

Buy Ev Maker LI Now

Li Auto’s impressive year-over-year stock price performance has stunned nearly every investor, myself included. While I’ve been bullish on this stock for some time, seeing it triple over the course of a one year time frame is truly something.

That said, Li Auto’s impressive and consistent growth rate, as well as the strength of its lineup and position in the dominant Chinese EV market, make this a stock I think is worth buying and holding for the long-term. The company’s strong Q3 2023 deliveries and a solid cash reserve of $10.17 billion position the company for aggressive investments in product development and retail expansion over the long-term.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.