Li Auto Inc.(NASDAQ:LI) shareholders will have a reason to smile recently, with the analysts making substantial upgrades to this year's statutory forecasts. The analysts greatly increased their revenue estimates, suggesting a stark improvement in business fundamentals. The market seems to be pricing in some improvement in the business too, with the stock up 9.9% over the past week, closing at US$30.42. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the current consensus from Li Auto's 20 analysts is for revenues of CN¥52b in 2022 which - if met - would reflect a huge 92% increase on its sales over the past 12 months. Losses are presumed to reduce, shrinking 13% from last year to CN¥0.28. Yet prior to the latest estimates, the analysts had been forecasting revenues of CN¥47b and losses of CN¥0.41 per share in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a sizeable increase to their revenue forecasts while also reducing the estimated loss as the business grows towards breakeven.
View our latest analysis for Li Auto
NasdaqGS:LI Earnings and Revenue Growth March 2nd 2022
Despite these upgrades, the analysts have not made any major changes to their price target of US$45.97, implying that their latest estimates don't have a long term impact on what they think the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Li Auto at US$64.00 per share, while the most bearish prices it at US$34.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Li Auto's past performance and to peers in the same industry. The period to the end of 2022 brings more of the same, according to the analysts, with revenue forecast to display 92% growth on an annualised basis. That is in line with its 89% annual growth over the past three years. Compare this with the broader industry, which analyst estimates (in aggregate) suggest will see revenues grow 22% annually. So it's pretty clear that Li Auto is forecast to grow substantially faster than its industry.
The Bottom Line
The most important thing here is that analysts reduced their loss per share estimates for this year, reflecting increased optimism around Li Auto's prospects. They also upgraded their revenue estimates for this year, and sales are expected to grow faster than the wider market. Some investors might be disappointed to see that the price target is unchanged, but we feel that improving fundamentals are usually a positive - assuming these forecasts are met! So Li Auto could be a good candidate for more research.
Better yet, Li Auto is expected to break-even soon - within the next few years - according to analyst forecasts, which would be a momentous event for shareholders. You can learn more about these forecasts, for freeon our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are upgrading their estimates.
Source: Simply Wall St.
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