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Li Auto Stock Is Well Positioned To Accelerate To Higher Highs

The last time I weighed in on Li Auto (NYSE:LI) stock, I said it could race higher on electric vehicle sales, President Biden’s interest and a global push for millions of them on the roads.

A front view of the Li Xiang One SUV from Li Auto (LI).
Source: Carrie Fereday / Shutterstock.com

That was on Dec. 3 as Li Auto traded around $33. Today, the stock is practically unchanged, trading at around $30. However, with global leaders pushing for millions of electric vehicles, Li Auto should accelerate higher.

Coupled with impressive delivery numbers and demand, the electric vehicle stock could easily race back to its all-time high of $47.70.

In June, the company delivered 7,713 Li ONEs, growth of nearly 321% year-over-year. In May, the company delivered 4,323 Li ONEs, a 101.3% increase year over year. Better, total deliveries through June increased just over 166% year over year to 17,575.

As for earnings, the company recently posted 319.8% revenue growth year-over-year to $545.7 million. Vehicle margins were up to 16.9%, as gross profits skyrocketed by nearly 803% year over year to $94.1 million.

Despite strong numbers, the company did lose $62.2 million. Better, the company expects to deliver between 14,500 and 15,500 vehicles in the second quarter, according to a company released.

That would be an increase of between 119.6% and 134.7% year over year.  In addition, Li Auto guided for revenue of between $609 million and $651.7 million, which would be an increase of between 104.6% and 119%.

Setting aside the one negative, I’d use any weakness in the stock as a “buy” opportunity. Demand isn’t slowing. Delivery numbers are likely to improve, and with global leaders pushing for millions of electric vehicles, the sector should remain red hot.

In addition, EV sales should overtake combustion engines in Europe, China and the U.S. over the next 12 years, according to a report by Ernst and Young.

Global Demand and LI Stock

In recent months, the U.S. pledged to cut emissions by up to 52%. China said it would cut all CO2 emissions over the next few decades, with Europe saying it’ll cut emissions by 55%.

To do so, they all want millions of emission-free electric vehicles on the roads, which could help boost Li Auto further.  Helping a great deal, Piper Jaffray analyst Alexander Potter believes EVs will account for up to 45% of new car sales by 2030, and up to 94% by 2040, added Barron’s contributor Al Root.

In addition, Credit Suisse analyst Bin Wang just raised his price target to $41 from $38 on Li Auto.

Plus, Li Auto could get caught up in the infrastructure boom.  Just the other day, the U.S. Senate reached an agreement on an infrastructure bill, which includes $550 billion in new spending on roads, bridges, drinking water systems and even electric vehicles.

At the moment, the current plan includes $15 billion in spending for EV charging infrastructure, electric buses, and electric transit, as noted by CNBC contributors Kevin Breuninger and Emma Newburger. All of which could help force electric vehicle stocks like Li Auto even higher.

Here’s the Bottom Line on Li Auto Stock

With demand for EVs gaining momentum, global government support, and the Biden Administration, Li Auto could push to higher highs.

Plus, with year-over-year deliveries only expected to accelerate, and support for an infrastructure bill, there’s a lot to like here.  From a current price of $33, I’d like to see the Li Auto stock back at $47.70 a share.

Again, use any weakness in shares of Li Auto as a long-term buying opportunity.

On the date of publication, Ian Cooper 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.

Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.


Article printed from InvestorPlace Media, https://investorplace.com/2021/07/li-stock-is-well-positioned-to-accelerate-to-higher-highs/.

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