China has become the largest EV market globally. Its EV sales stood at 1 million in 2020 and it is expected that the sales will increase to 1.9 million by the end of this year. With support from the Chinese government and growing demand for EVs, a few EV companies are making the most of this momentum. Li Auto (NASDAQ:LI) is one such company that has marked its presence in the industry and has a massive market to cater to. LI stock is a strong player in the industry and is grabbing the market despite stiff competition.
If you think that Tesla (NASDAQ:TSLA) or Nio (NYSE:NIO) are too high priced, LI stock is a great choice. The stock hit an all-time high of $47 in November 2020 and has shown volatility since then. Every correction is an opportunity to add the stock to your portfolio. It is currently at a low level of $18. Let’s take a look at the two reasons LI stock must be on your radar.
Li Auto has a massive market to cater to. Despite the competition in the industry, every EV manufacturer has an opportunity to grab the market. The company delivered 5,539 Li ONEs in April, which is a 111% year-on-year increase and a 13% month-over-month increase. It took the total deliveries to 51,715. Interestingly, the company hit the 50,000 mark within 17 months and it is a huge feat. It has created the fastest delivery record among all the EV companies today.
It had delivered 32,624 vehicles in 2020 and most of the sales came from the fourth quarter. There was a 65% rise from the third quarter which shows that Li has seen sales grow at an impressive speed.
Additionally, the sales for the first quarter were estimated around 10500-11500 and the company proved that its vehicles are in demand and it has the ability to scale up production. It delivered 12,579 EVs in the first quarter which is a 334% increase year over year. The company has the ability to generate high sales numbers in 2021 and it will take LI stock higher.
Li is a high-growth company and it is interesting to note the year-over-year growth in sales. In January, the company delivered 5,379 Li ONEs which was a 355% rise from Jan 2020. The February deliveries stood at 2,300 Li ONEs showing a 755% rise year over year. In March, it delivered 4,900 Li ONEs showing a 238% rise year over year and in April it delivered 5,539 EVs.
Not to mention, the company aims to bolster the sales and service offerings in the coming months.
Li Auto Could be Profitable This Year
When compared with rivals, XPeng (NYSE:XPEV) and Nio, Li Auto looks the closest to profitability. It reported a net income of $16.5 million for Q4 2020. Nio and XPeng both reported losses. It is still expected that the company will report a loss in the next quarter, but could reach the profitability mark sooner than its competitors. It manages the costs efficiently while growing at a rapid pace.
The company has a strong balance sheet and if we consider the sales and revenue potential, the balance sheet seems a lot better. It has $4.5 billion in cash and only $78 million in debt. It shows that the company has adequate liquidity and can handle the debts with ease. The company also has the resources to invest in research and development activities without worrying about the funds.
The Bottom Line on LI Stock
Li Auto’s sales are growing at an unimaginable pace and the company has become an important part of the ever-expanding EV industry. It boasts of a healthy balance sheet and strong fundamentals that throw light on its potential to grow in the coming months.
LI stock is the perfect addition to your portfolio in the dip. If the company beats analysts’ estimates in Q1 earnings, the stock will go much higher.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.