Tuesday, 19 March 2024
by BD Banks
Shares of Li Auto (NASDAQ: LI) are down 12.3% as of 3:45 p.m. ET Monday after a noted Wall Street analyst firm downgraded the Chinese electric vehicle (EV) maker.
In a note to clients earlier today, Bank of America securities lowered its per-share price on Li Auto to $55 from $60. Bank of America simultaneously reiterated its buy rating on the stock.
To justify its relative bearishness, Bank of America says it has lowered its volume sales estimates for Li Auto by 6% and 4%, respectively, for 2024 and 2025 as a result of lighter-than-expected new orders for the MEGA Multi-Purpose Vehicle (MVP) model. The firm also reduced its net income estimates for Li by 9% and 7% this year and next, respectively. Bank of America further pointed to lower entry-level prices and higher discounts on Li’s 2024 L-series models following the recent launch of redesigned Li L7, L8, and L9 models earlier this month.
Since the lowered target still represents a roughly 66% premium from today’s close, it’s no surprise Bank of America also reiterated its buy rating on Li Auto today — even if the market’s response to the incrementally negative note didn’t reflect as much today. Bank of America previously named Li one of its “Top Picks” for 2024, and obviously still believes the stock is a worthy portfolio candidate today.
I tend to agree with that assessment from a long-term investor’s perspective — even as many investors increasingly express doubt over what appears to be overly optimistic valuations for electric vehicle stocks as a group. For investors willing to buy now and hold as the market’s best EV stocks take market share in these early stages, Li Auto could prove to be one of the more prominent winners in the space.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.