Citi has updated its outlook on Li Auto (NASDAQ: NASDAQ:LI), raising the price target for Li Auto to $25.50 from the previous $21.60 while keeping a Neutral rating on the stock.
The adjustment follows a period of stronger-than-anticipated sales in the electric vehicle (EV) sector for July and August 2024, prompting an optimistic sales forecast for the upcoming years.
Citi now expects Li Auto to sell 520,000 units in 2024, an increase from the previous forecast of 509,500 units. The forecast for 2025 and 2026 was also raised to 620,000 and 690,000 units, respectively.
Consequently, revenue projections were increased by 2-3% to reach 146.7 billion, 162.4 billion, and 174.9 billion RMB for the years 2024 through 2026.
The firm's net profit (NP) forecast for Li Auto saw an uplift of 7-12%, with new projections set at 8.17 billion, 7.75 billion, and 8.68 billion RMB for the same period. This revised forecast is based on the assumption that the strong sales tailwind in the EV sector will persist.
In other recent news, Chinese companies listed in the U.S., including Alibaba (NYSE:BABA), JD (NASDAQ:JD).com, PDD Holdings, Nio (NYSE:NIO), and Li Auto, saw a significant rise in shares following Beijing's announcement of substantial stimulus measures. The People's Bank of China introduced policy actions aimed at enhancing capital market funding and rejuvenating demand within the world's second-largest economy. Furthermore, Citigroup and Goldman Sachs have recently lowered their economic growth forecasts for China in 2024, indicating the need for additional fiscal stimulus.
In a related development, Citigroup downgraded its rating on Li Auto shares from Buy to Neutral, citing potential challenges for the company's L series models and increased competition in the electric vehicle market. The firm also adjusted the price target for the stock, reflecting concerns about the aging of Li Auto's L series models and potential margin erosion due to increased competition.
On the other hand, BofA Securities raised its price target for Li Auto following the company's strong second-quarter financial results, which revealed an 11% year-over-year increase in revenue and an 18% quarter-over-quarter increase in non-GAAP earnings. Li Auto also reported a year-over-year growth of 25.5% in vehicle deliveries and is planning to introduce multiple 800-volt high-voltage pure electric vehicles next year.
InvestingPro Insights
Following Citi's updated outlook on Li Auto, insights from InvestingPro reveal additional dimensions to the company's financial health and market performance. Li Auto boasts a strong balance sheet, holding more cash than debt, which is a reassuring sign for investors concerned about the company's financial resilience. Furthermore, the valuation of Li Auto indicates a robust free cash flow yield, suggesting that the company is generating ample cash relative to its share price.
InvestingPro Data highlights that Li Auto's market capitalization stands at $24.33 billion, with a P/E ratio of 16.67, reflecting its current profitability relative to its share price. The company has experienced a significant revenue growth of 79.66% over the last twelve months as of Q2 2024, showcasing its rapid expansion in the EV market. Despite a challenging six-month period where the stock price took a considerable hit, declining by 27.21%, the recent three-month price total return shows a strong rebound of 19.87%, indicating a potential turnaround in investor sentiment.
For readers seeking a deeper dive into Li Auto's financials and stock performance, there are additional InvestingPro Tips available, which can provide further insights into the company's industry position and future profitability expectations.
These insights and more are available on InvestingPro, which includes a total of 11 tips for Li Auto, offering a comprehensive perspective for potential investors. The InvestingPro Fair Value estimate of $29.16 also suggests that the stock may have room to grow from its previous close of $22.20.
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