Citi has reaffirmed its buy rating on shares of Li Auto (NASDAQ: NASDAQ:LI), with a consistent price target of $26.20.
The affirmation comes after a briefing on the company's financial outlook, where Li Auto projected a quarter-over-quarter improvement in its third-quarter 2024 vehicle gross profit margin (GPM) to 19%, with a blended GPM of 20%.
The company has also revised its capital expenditure (Capex) forecast for the full year 2024 to $1-1.2 billion, down from the initial guidance of $2 billion. Research and development (R&D) spending is expected to remain below 12 billion yuan for the fiscal year.
Li Auto's AD Max technology is now representing nearly 70% of orders in the 300,000 yuan and above price segment, indicating strong customer adoption. The company is also preparing for the future by planning to launch battery electric vehicle (BEV) SUVs in the first half of 2025, with over 2,000 supercharging stations to be deployed by the time of the official launch of these vehicles.
Citi's positive outlook on Li Auto is rooted in the company's pioneering role in extended-range electric vehicle (EREV) technology within China. Analysts expect a surge in the adoption of EREV in the region, as it presents a compelling alternative to both battery electric vehicles (BEVs) and internal combustion engine vehicles (ICEs) due to its longer driving range and lower bill of materials (BOM) cost.
In other recent news, Li Auto has reported significant improvements in its financial performance. The electric vehicle manufacturer's Q2 2024 net income saw an impressive 86% quarter-over-quarter increase, reaching Rmb1.1 billion, and exceeding market expectations. Revenue for the same quarter also increased by 24% to Rmb31.7 billion, driven by a 35% rise in vehicle volume.
Morgan Stanley has maintained its positive stance on Li Auto, reiterating an Overweight rating with a price target of $29.00. This confidence is based on the company's current and future business strategies, including a focus on operational efficiency and sales conversion, as well as planned entry into the Battery Electric Vehicles market by 2025.
Li Auto's management has also reported a significant uptake in the adoption of its autonomous driving features, with over 99% of users regularly utilizing these features. Looking ahead, the company has provided guidance for Q3 2024, projecting vehicle deliveries between 145,000 and 155,000 units, which would represent a 34-43% quarter-over-quarter increase.
InvestingPro Insights
Li Auto (NASDAQ:LI) has demonstrated a robust financial outlook, supported by real-time data from InvestingPro. With a market capitalization of $18.98 billion, the company stands as a significant player in the automotive industry. The revised gross profit margin projections align with Li Auto's strong revenue growth, which is evident from the last twelve months as of Q1 2024, showing a remarkable 139.76% increase. This growth trajectory is further substantiated by a solid gross profit of $4009.55 million during the same period.
InvestingPro Tips indicate that Li Auto holds more cash than debt on its balance sheet, which is a promising sign for investors looking for a stable financial position. Additionally, the company's valuation implies a strong free cash flow yield, which is an attractive metric for those interested in the company's ability to generate cash. For readers seeking more comprehensive analysis, InvestingPro features additional tips, with a total of 11 expert insights available on their platform.
The forward-looking strategies of Li Auto, such as the development of battery electric vehicle (BEV) SUVs and the expansion of supercharging stations, are reflected in the positive sentiment of analysts, two of whom have revised their earnings upwards for the upcoming period. This optimism is further echoed by the company's stock trading near its 52-week low, which may present a potential entry point for investors. For a more detailed investment perspective, the InvestingPro platform offers an in-depth fair value estimate of $29.39, slightly below the analyst target of $30.58, suggesting a cautious but optimistic valuation of the company's shares.
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