EV maker Li Auto's stock has dropped 13% this year. Is now the time to buy?

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Chinese EV maker Li Auto (NASDAQ:LI) has seen its stock fall 13% since the start of the year, despite being in the midst of a new model rollout and analysts rating the stock a strong buy. Is now the time to buy?

While Li’s stock has declined significantly in recent months, it still fared better than Chinese peers Xpeng (XPEV) and NIO (NIO). Although the three stocks have traded largely in tandem over the past few months, Xpeng shares have tumbled 42% while NIO shares have dropped 31%.

De-listing concerns are fading

Chinese stocks have been volatile the past few months due largely to ongoing concerns that they may be delisted amid scrutiny by U.S. and Chinese authorities. But investors received some good news this month when the Chinese government announced it would be supportive of Chinese companies listing abroad.

Based in Beijing, Li currently markets one EV model, the Li ONE, a premium extended-range SUV that seats six. The company’s primary market is China.

For February, Li delivered 8,414 Li ONE vehicles, up 266% from the prior year, but down 31% since January. The company attributed the month-over-month decline to pandemic and holiday-related supply shortages in China. Li delivered 90,491 vehicles in 2021.

The EV maker has said it is targeting production of 1.6M vehicles in 2025. As of the end of February, Li had 220 stores in 105 cities.

Is LI a Buy?

Wall Street analysts, on average, have a Strong Buy rating on the stock. Of the 19 analysts tracked by SA, 11 rated the stock a Strong Buy, seven a Buy and one a Hold. No one currently rates the stock a Sell. SA authors, on average, also have rated the stock a Strong Buy.

SA’s Quant Ratings for Li is a buy. The company earned an A+ for growth, A- for revisions, B+ for momentum, and a B- for profitability. It received a D for valuation, however.

BofA Securities analysts have rated the stock a Buy, with a price target of $41, citing “robust” demand for luxury EVs, a “solid” new model pipeline, fast point of sales expansion, and the vehicle’s extended drive range.

Li is expected to roll out its second model, an extended range SUV, in Q2 2022, with deliveries slated to begin in Q3. Two battery EV models are expected to debut in 2023, according to BoA.

Analysts at Nomura also have a Buy rating on the stock with a price target of $43.20, citing Li’s ability to differentiate itself from competitors by focusing on full-sized SUVs while others have targeted the mid-sized market.

For a more in-depth look at Li, check out SA contributor The Asian Investor’s “Li Auto: Deeply Discounted EV Growth Stock” or SA contributor A.R. Parker’s “Li Auto: An Automaker Cruising on the EV Highway”.

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