Li Auto's Mega EV Launch Spurs Bank of America to Increase Price Target

Bank of America's Ming Hsun Lee raised their price target on Li Auto (NASDAQ: LI) by 5.3% from $57 to $60 on 2024/03/04. The analyst maintained their Strong Buy rating on the stock.

According to Lee, Li Auto's recent launch of its first pure-EV, Mega, at the company's 2024 Spring Launch Event on March 1st, has catalyzed the price target hike. Lee expressed increased optimism about the sales prospects for the new Mega MPV and L6 models.

As a result of this positive outlook, Lee has revised their sales volume predictions for 2024, increasing them by 4%. Additionally, their EPS forecasts for 2025 have been raised by 2%.

Li Auto, a Chinese new energy vehicle manufacturer, recently reported impressive financial results for the fourth quarter of 2023 and the full year. In Q4 2023, the company achieved an EPS of $0.60, representing a significant year-over-year increase of 354.8%. Revenue for the same period amounted to $5.88 billion, up 136.4% year-over-year. Li Auto also reported a notable increase in vehicle deliveries, with 131,805 units sold, marking a growth of 184.6% compared to the previous year.

For the full fiscal year 2023, Li Auto's EPS stood at $1.61, and revenue reached $17.44 billion, both showing substantial year-over-year increases of 173.5%. The company's total vehicle deliveries for the year amounted to 376,030, representing a growth rate of 182.2% compared to the previous year.

Looking ahead, Li Auto's management has provided guidance for the first quarter of 2024. They anticipate revenue in the range of $4.4 billion to $4.53 billion, which, if achieved, would reflect a year-over-year increase of 66.3% to 71.3%. The company also projects a total of 100,000 to 103,000 vehicle deliveries during the same period, representing a growth rate of 90.2% to 95.9% compared to the previous year.

Li Auto's Chairman and CEO, Mr. Xiang Li, expressed confidence in the company's future performance. He highlighted their impressive growth in 2023, with vehicle deliveries increasing by 182.2% and making Li Auto the best-selling brand among NEVs priced above RMB300,000 in China. Mr. Li also emphasized the company's commitment to research and development, scale expansion, and improving operating efficiency, which he believes will fuel Li Auto's growth in 2024.

CFO Mr. Tie Li shared his satisfaction with Li Auto's financial performance in Q4 2023, mentioning record-high vehicle deliveries and revenue growth. He also highlighted the company's gross margin of 23.5% for the quarter and an annual gross margin of 22.2%. Mr. Li noted that 2023 marked Li Auto's first year of profitability, with a full-year net income of RMB11.81 billion. The company's cash reserve as of the end of 2023 stood at RMB103.67 billion.

Despite the positive outlook for Li Auto, consensus among analysts suggests that the company's upcoming year will deliver earnings per share (EPS) of $0.91. If these predictions hold true, LI's next yearly EPS would see a decline of 44.9% on a year-over-year basis.

In terms of stock performance, since Li Auto's latest quarterly report on February 26, 2024, the stock price has experienced a decline of 9%. However, when considering the year-over-year performance, the stock is up by an impressive 50.4%. During this period, Li Auto has outperformed the broader market, with the S&P 500 experiencing a 26.7% increase.

It should be noted that Ming Hsun Lee, the Bank of America analyst who raised the price target on Li Auto, is ranked in the bottom 6% out of 4,485 Wall Street analysts by WallStreetZen. Lee specializes in the Consumer Cyclical sector and has an average return of -32.7% and a win rate of 8.3%.

Li Auto Inc., formerly known as Leading Ideal Inc., is a Chinese new energy vehicle manufacturer. The company designs, develops, manufactures, and sells smart electric sport utility vehicles, with its flagship model being the Li ONE. Li Auto also provides sales, after-sales management, technology development, and corporate management services. The company was founded in 2015 and is headquartered in Beijing, China.

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