Li Auto Finally Nears Our Buy Zone, Great 2025 Prospects

seekingalpha11-21

LI has retraced as expected, with the bulls seemingly defending the $22s as the new support level.Much of the tailwinds are naturally attributed to the double beat FQ3'24 performance, excellent ...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nLi Auto Finally Nears Our Buy Zone, Great 2025 Prospects\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-21 02:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738873-li-auto-stock-finally-nears-buy-zone-great-2025-prospects><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>LI has retraced as expected, with the bulls seemingly defending the $22s as the new support level.Much of the tailwinds are naturally attributed to the double beat FQ3'24 performance, excellent ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738873-li-auto-stock-finally-nears-buy-zone-great-2025-prospects\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4738873-li-auto-stock-finally-nears-buy-zone-great-2025-prospects","article_id":"2485239121","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/160187253/image_160187253.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485239121","pubTimestamp":1732125600,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"LI has retraced as expected, with the bulls seemingly defending the $22s as the new support level.Much of the tailwinds are naturally attributed to the double beat FQ3'24 performance, excellent Octobe","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","EVS.SI":"MSCI China Electric Vehicles and Future Mobility ETF-NikkoAM","BK4551":"寇图资本持仓","BK4548":"巴美列捷福持仓","BK4563":"昨日强势股","BK4588":"碎股","LI":"理想汽车","BK4503":"景林资产持仓","BK4099":"汽车制造商","BK4555":"新能源车","BK4526":"热门中概股"},"translate_title":"理想汽车终于接近我们的买入区，2025年前景广阔","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"LI":0.9,"EVS.SI":0.6},"content_text":"LI has retraced as expected, with the bulls seemingly defending the $22s as the new support level.Much of the tailwinds are naturally attributed to the double beat FQ3'24 performance, excellent October 2024/ YTD deliveries, and promising FQ4'24 guidance.This is significantly aided by LI's richer profit margins and growing net cash on balance sheet, allowing the automaker to sustainably fund its growth opportunities domestically/ internationally.The management's 2025 BEV launch and cautious international approaches have been highly prudent, since it allows the automaker to remain profitable compared to its cash burning peers.Even so, we expect LI to continue trading sideways, before sentiments surrounding Chinese EVs improve and the management delivers robust international growth numbers.   Pgiam    Li Auto Finally Nears Our Buy Zone - Great 2025 Prospects We previously covered Li Auto (NASDAQ:LI) in September 2024, discussing why we had upgraded the stock to a Buy then, attributed to the improved sentiments surrounding Chinese ADRs, significantly aided by the Chinese government's raised EV subsidies. These had contributed to the automaker's robust YTD deliveries and the management's promising FQ3'24 guidance, with the completion of its production capacity ramp up and cost efficiency strategies potentially triggering expanded H2'24 bottom-lines. LI YTD Stock Price Trading View Since then, our recommended buying point of between $18s and $21s is materializing, as LI now trades at $22s after losing -18.2% of its recent gains, with the same moderation observed in its Chinese automaker peers to varying degrees. Our conjecture has turned out as expected indeed, since the stock previously nearly doubled in September 2024, attributed to the Chinese government's generous stimulus towards real estate and automotive sectors - triggering the Chinese automakers' robust Q3'24 sales thus far. The same has been observed for LI, with it reporting 51.44K deliveries in October 2024 (-4.2% MoM/ +27.2% YoY) and YTD sum of 393.25K (+38.1% YoY). This has directly contributed to the automaker's growing RMB200K and higher segment market share to 17.3% (+2.9 points QoQ/ +1.9 YoY) in the latest quarter - solidifying its growing mindshare amongst vehicle buyers domestically. The same robust numbers have also been observed in LI's double beat FQ3'24 performance, with total revenues of $6.1B (+38.6% QoQ/ +28.4% YoY) and adj EPS of $0.52 (+160% QoQ/ +15.5% YoY). The bottom-line beat further exemplifies the management's highly successful cost optimization approaches along with improving operational/ economy of scale, as observed in the richer operating margins of 8% (+1.3 points QoQ/ +6.5 YoY) and Free Cash Flow margin of 21.1% (+15.3 points QoQ/ -18.2 YoY). These have directly contributed to the automaker's increasingly rich balance sheet at net cash position of $13.92B (+14.3% QoQ/ +29.1% YoY), implying its ability to sustainably fund its organic growth domestically despite the intense competition and internationally from 2025 onwards. These are promising developments indeed, since we expect November and December 2024 to bring forth even higher delivery numbers, based on LI's excellent Q4'24 delivery guidance of 165K vehicles at the midpoint (+7.9% QoQ/ +25.1% YoY) and total revenues of $6.35B (+4% QoQ/ +7.9% YoY). These developments further demonstrate why the management's long-term goal of 25% market share captured across the RMB 200K market (including hybrids and BEV) is not overly ambitious indeed, especially since the automaker is slated to release their first few BEV offerings in 2025. The Consensus Forward Estimates Seeking Alpha Based on LI's YTD adj EPS of $0.88, assuming a similar net income margin of 8.9% to the management's FQ4'24 revenue midpoint guidance of $6.35B, and the resultant estimated FQ4'24 adj EPS of $0.53, we believe that the management may deliver a robust FY2024 adj EPS of $1.41 (+16.5% YoY), easily beat the consensus FY2024 adj EPS estimates of $1.21. Despite the notable consensus downgrades thus far, it is apparent that the automaker is expected to generate a promising top/ bottom-line performance at a CAGR of +24.5%/ +11.5% through FY2026, building upon the +114.4%/ +276.1% recorded between FY2021 and FY2023, respectively, if not more. LI Valuations Seeking Alpha This is also why we believe that LI remains reasonably valued at FWD P/E non-GAAP valuations of 18.75x, near to its 1Y P/E mean of 18x and not too far from the sector median 17.13x. Even if we take its FWD PEG non-GAAP ratio of 0.83x into consideration, based on the projected CAGR of +22.34% from the LTM adj EPS of $1.47 and the consensus FY2026 adj EPS estimates of $2.20, it is undeniable that LI is a compelling Buy at current levels. This is especially if compared to its profitable peers, such as BYD Company (OTCPK:BYDDF) at 0.85x and Tesla (TSLA) at 15.70x, with LI's reasonable valuations offering interested investors with an improved margin of safety.  So, Is LI Stock A Buy, Sell, or Hold?  LI 4Y Stock Price Trading View For now, LI has indeed returned most of its recent gains as it trades below its 50/ 200 moving day averages, while seemingly finding a new floor at the previous resistance levels of $22s/ 100 day moving averages. For context, we had offered a fair value estimate of $13.30 in our last article, based on the H1'24 annualized adj EPS of $0.74 and 1Y P/E mean of 18x. Based on our estimated FY2024 adj EPS of $1.41 (+16.5% YoY), we are looking at a raised fair value estimates of $25.30, implying that the LI stock is currently cheap at $22.98 at the time of writing. Based on the consensus stable FY2026 adj EPS estimates of $2.20 (previously $2.25), there remains an excellent upside potential of +74% to our long-term price target of $39.60 (previously $40.50), thanks to the recent pullback. As a result of the improved margin of safety and the potentially new support levels at the $22s, we are reiterating our Buy rating for the LI stock. Risk Warning While LI may report robust sales growth domestically, investors seeking accelerated global sales presence may want to temper their expectations indeed, since the management has only commenced their expansions through dealer partnership in November 2024. With the automaker only focusing on the Middle East and Central Asia, it is undeniable that the hefty tariffs imposed by the Western Europe and North America governments have posed international growth headwinds. On the other hand, LI has differentiated itself by relying on local sales partners to improve cost efficiencies, against the numerous retail centers/ showrooms/ lifestyle spaces offered in China. This is compared to those offered by NIO (NIO) at hundreds of Houses/ stores installed globally - one which may have triggered the impacted profit margins thus far. At the same time, it is apparent that LI has opted to take its global expansion slow, a prudent choice in our opinion, since it allows the management to manage costs effectively while slowly building its international partnership/ customer base - with it naturally being a more sustainable growth approach compared to the overly rapid expansions embarked on by other Chinese automakers. Even so, we expect the stock to continue trading sideways between its recently established support levels of $22s and the resistance levels of $29s in the intermediate term, before sentiments surrounding Chinese EVs improve and the management delivers robust international growth numbers.  Patience may be more prudent in the mean time.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485239121"}