Things should get better for Chinese electric-vehicle maker
Li Auto.
Soon.
Citi analyst Jeff Chung opened a positive “30-day catalyst watch” for Li (ticker: LI), on Wednesday, which means he expects the stock to rise in coming weeks because something good is about to happen.
Strong sales volume with better gross margins for its vehicles is his primary catalyst. Li’s “weekly insurance sales…beat market expectations,” wrote Chung in a research report. He tracks insurance registration data to get a real-time read on sales of many EV makers. The ones in China typically report monthly sales figures. “We expect shipment[s] to further accelerate over the next few weeks,” Chung added.
Faster sales can get Li stock moving toward the analyst’s target price of $53.33 per U.S. listed American depositary receipt, or ADR.
One U.S. ADR is equivalent to two shares. Li also has shares listed in Hong Kong. The dual listing and multiple currencies are why U.S. dollar-denominated price targets include dollars and cents. Most often analyst price targets for stocks above, say, $10 a share round to the nearest dollar.
Chung’s target is about 70% higher than the $31.49 level where the ADRs closed on Tuesday, so investors have taken notice. ADRs were up about 4.3% in premarket trading, while
S&P 500
and
Nasdaq Composite
futures were both up about 0.1%.
Li shares are popular on Wall Street. Almost 90% of analysts covering the company rate them Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target, however, is lower than Chung’s, at about $38 per ADR.
The Buy-rating ratio for
NIO
(
NIO
) and
XPeng
(XPEV), two other U.S.-listed Chinese EV makers, are 66% and 57%, respectively. Better sales growth is part of the reason Wall Street prefers Li.
Over the past 12 months, Li deliveries have grown about 75%. NIO deliveries are up about 27%.
XPeng
deliveries have fallen about 25%.
The relative growth lines up with stock performance. Li shares have performed the best, down just 2% over the past 12 months. Shares are down, but NIO and XPeng shares are down about 52% and 60%, respectively, over the same span.
Write to Al Root at [email protected]
Read the full article here
