The electric vehicle market in China refuses to slow down. It has consistently grown over the years and has multiple EV makers fighting for the top position in this hot industry. Chinese EV maker Li Auto (NASDAQ:LI) is making news for the right reasons. LI stock is up by 9% in the past week. One of the strongest players in the crowded EV industry, Li Auto managed to report strong delivery numbers despite the chip shortage. The company is making strong moves to get a larger piece of the largest EV market in the world.
LI stock was trading at $16 in July 2020 and it hit a high of $47 in November 2020. The stock showed volatility due to chip shortage and investor sentiment, it is trading close to $28 today.
I am bullish on the stock and strongly believe that the company has the ability to scale and hit new highs. I had recommended a buy when the stock was trading at $18. If you had purchased it at that level, you would have already gained more than 30% on the stock.
However, if you missed the chance then, you can pick up LI stock now. Let’s dig into the details on the investment case for the stock.
Strong delivery numbers
Currently, the company has a single EV model, Li ONE in the market. It delivered 4,323 Li Ones in May, representing a 101% rise year over year. It delivered 5,539 Li ONEs in April, which was a 111% year-over-year increase. LI Auto saw 4,900 deliveries in March, representing a 238% year-over-year increase.
It is interesting to note that the company has seen more than a 100% rise in its deliveries year over year. This shows the strength and ability to scale even during a pandemic and chip shortage.
The company expects to deliver between 14,500 and 15,500 vehicles for the second quarter. To achieve this target, the company will have to deliver a minimum of 4,638 EVs which looks realistic. Li is targeting the production of more than 10,000 vehicles a month and plans to scale up deliveries from September.
It will begin the delivery of the Li-One SUV updated version from this month and this product has a lot of enhancing and safety features. The car is priced at $52,850 as compared to the Shanghai-made Tesla Model 3 available for $39,047.
The worst of the semiconductor shortage is almost over and it has led to the easing of supply in the industry. This will allow the company to scale up production in the coming months.
The Wall Street loves LI stock
I am not the only one bullish on LI stock. Wall Street expects the stock to soar to new heights in the near future. Wedbush analyst Daniel Ives is bullish on LI stock in addition to other EV players like Tesla (NASDAQ:TSLA), XPeng (NYSE:XPEV) and Nio (NYSE:NIO).
The analyst notes that currently only 5% of the auto sales in China are EVs and there could be high consumer demand over the next two years. Further, Citi Analyst Jeff Chung has a price target of $43.60 with a Buy rating on the stock after the stellar Q1 results.
InvestorPlace analyst Mark Hake is of the opinion that LI stock is worth $30.21 and I strongly agree with my colleague. However, I believe the stock can go higher than the thirties range and the current price can be a great opportunity to add it to your portfolio.
I believe LI Auto has the ability to scale to new heights and hit new delivery numbers. As the company expands its product offering, it will be able to reach a wide consumer base and increase revenue. There is competition in the market but there is space for all players and LI Auto has already marked its presence in the crowded industry.
All in all, LI stock is a strong buy.
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.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long term gains. Her knowledge of words and numbers helps her write clear stock analysis.
