The mere mention of electric vehicles is well, electrifying. The sector, and other related stocks like Li Auto (NASDAQ:LI) show no signs of slowing down.
Over the last few weeks alone:
- Tesla (NASDAQ:TSLA) ran from a July low of $187.43 to $528
- Nio (NYSE:NIO) ran from $6.80 to $56
- Workhorse Group (NASDAQ:WKHS) ran from $4.14 to $28.87
- Kandi Technologies (NASDAQ:KNDI) ran from $4.10 to $15
- Nikola Corp. (NASDAQ:NKLA) just ran from $17.50 to a recent high of $29.41 in days
- The Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV) just exploded from $15.85 to $21.64
Even better, Li Auto stock – which ran from $15 to $43 – could see $60 before the year is out, in my opinion.
Electric Vehicle Stocks Will Only Accelerate
Analysts say we’ll see 125 million EVs on the road by 2030. California is banning the sale of gas powered cars by 2035. European automakers need to sell more EVs with orders to cut CO2 emissions by 40% by 2030. In China, EV market share could grow 14% by 2022.
Plus, under a Biden administration, we could see more EVs on the road. As noted on his website, one of his goals is to accelerate the deployment of electric vehicles.
“There are now one million electric vehicles on the road in the United States. But a key barrier to further deployment of these greenhouse-gas reducing vehicles is the lack of charging stations and coordination across all levels of government. As President, Biden will work with our nation’s governors and mayors to support the deployment of more than 500,000 new public charging outlets by the end of 2030.”
In addition, according to analysts at Wedbush, 3% of all auto sales are currently electric. By 2025, the firm expects that number to be closer to 10%.
Li Auto Stock Earnings Are Explosive
Along with the EV boom, Li Auto stock earnings are impressive. While it did report a wider than expected net loss, revenue beat estimates thanks to rising deliveries. Net loss narrowed to RMB320.7 million, or $47.2 million, or RMB0.52 from a low of RMB345.2 million, or RMB2.71 in the second quarter. Analysts were looking for a loss of RMB0.38 per share.
Revenue was up nearly 29% quarter over quarter to RMB2.51 billion, or $369.8 million.
That came in above estimates for RMS2.42 billion. Gross margins improved nearly 20% from 13.3%. In addition, deliveries were up 31.1% quarter-over-quarter to 8,660 after 128% growth in the second quarter.
Mr. Xiang Li, founder, chairman and CEO said, “We delivered 8,660 Li ONEs in the third quarter, representing a 31.1% quarter-over-quarter increase and setting a new quarterly record. Cumulative deliveries in 2020 at the end of October reached 21,852 vehicles. For the fourth quarter of 2020, we expect our growth momentum to continue with deliveries reaching 11,000 to 12,000 vehicles.”
Analysts Love the Electric Vehicle Boom
Li Auto stock was just upgraded by Citigroup analyst Jeff Chung to a “buy” rating from a “hold” rating with a price target of $45 a share. In boosting his target, the analyst appears to be far more optimistic about the fourth quarter and new year new year for EVs, noted Barron’s contributor Al Root.
In addition, JP Morgan analyst Nick Lai says Chinese EV industry growth will only speed up next year. He expects EVs to account for up to 20% of all vehicles sold by 2025.
In short, with accelerating demand for electric vehicles, support from global governments and the Biden administration, related stocks like Li Auto have only just begun to take off. I strongly believe the Li Auto stock could test $60 before the year is over.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.