A Comprehensive Analysis on Li Auto's Potential

As the China automotive industry undergoes a transformative shift towards EVs, $Li Auto(LI)$ emerges as a compelling player in this competition. With Q4 2023 earnings on the horizon, coupled with recent analyst upgrades, let's delve into the factors that position Li Auto as a potential buy.

Earnings Expectations and Track Record

Li Auto is set to unveil its Q4 earnings results on February 26th, and market expectations are running high. The consensus EPS estimate stands at $0.33, with a revenue estimate of $5.53 billion. Notably, Li Auto has a commendable track record of beating EPS estimates 88% of the time over the last two years, showcasing a consistent performance that resonates with investors.

In January, Li Auto reported a robust 106% year-over-year increase in vehicle deliveries, reaching 31,165 units. While this marked a 38% month-over-month decline, it aligned with market expectations. Analyst checks by Morgan Stanley indicated a correlation between delivery figures and a new order intake of 33-35k, adding confidence to market predictions.

Moreover, Li Auto's customer-centric move of providing complimentary charging services during the Chinese New Year period underscores its commitment to enhancing the ownership experience.

Deutsche Bank's recent upgrade of Li Auto to a Buy rating, despite a slight adjustment in the 12-month price target, reflects a bullish stance. The 32% decline in late November placed Li Auto's shares in what Deutsche Bank considers a compelling position. The upgrade is grounded in Li Auto's robust product pipeline and an attractive valuation for a top-tier EV player.

The management's prowess in embracing Extended Range Electric Vehicle (EREV) powertrain technology, consistently achieving or surpassing targets, adds to the investment thesis. Deutsche Bank anticipates a rebound in volume and margin starting in the second quarter, driven by the launch of new and refreshed models.

Li Auto EREV platform

Li Auto's product cycle is poised for excitement, with the launch of the L6 mid-large SUV (EREV) in April. Priced competitively and targeting a younger family audience, the L6 is expected to compete directly against popular models, both electric and traditional combustion engine ones. Deutsche Bank forecasts around 30,000 monthly deliveries for the L6.

Additionally, Li Auto's existing L-series models and the MEGA MPV on the Battery Electric Vehicle (BEV) side contribute to an optimistic delivery forecast. Analysts project a total of 625,000 deliveries for Li Auto in 2024, reflecting a significant 66% year-over-year increase.

Technical Analysis

LI Daily Chart

From a technical analysis perspective, Li Auto has been in a downtrend since August 2023. The upcoming earnings announcement provides a potential catalyst that could influence the stock's trajectory. If the price breaks above post-earnings, it could signal a shift in sentiment, possibly testing the downtrend line around 37-38. On the flip side, a downturn might find support at the former levels around 33.

In conclusion, Li Auto's unique position in the EV market, coupled with strong delivery figures, analyst endorsements, and an exciting product cycle, paints an optimistic picture. As investors await the Q4 earnings report, the intersection of fundamental strength and technical analysis creates an intriguing scenario whereby Li Auto appears poised for potential growth.

Share your perspectives!

What are your expectations for Li Auto's upcoming earnings report? How do you interpret the technical analysis insights?

Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. Always conduct your research before making investment decisions.

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