Ongoing macro challenges, especially the elevated interest rate environment, are taking a toll on consumers’ ability to afford cars, consequently affecting the sales of EVs (electric vehicles). This is why most Wall Street analysts are either cautiously optimistic or sidelined on EV stocks. Nonetheless, TipRanks’ Stock Comparison tool shows that analysts favor one EV stock, but it’s not Tesla (NASDAQ:TSLA) despite its leadership in the segment. In fact, Wall Street analysts are bullish on the Chinese vehicle maker Li Auto (NASDAQ:LI).
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Li Auto stock has delivered an incredible gain of about 97% so far this year. Moreover, analysts see further upside potential in the stock. Let’s examine the factors driving Li Auto stock higher.
Li Auto Stock – Key Growth Drivers
The appreciation in Li Auto stock reflects its stellar deliveries, rising revenue, and efficiency in the production process, which supports volumes and margins. Furthermore, the launch of Mega, the EV maker’s first all-electric car, is a positive.
Impressively, Li Auto delivered 105,108 units in Q3, representing a year-over-year increase of 296.3%. Concurrently, revenue from vehicle sales skyrocketed by 271.6% to reach $4.61 billion. Particularly striking is the substantial improvement in vehicle margin. Li Auto delivered a vehicle margin of 21.2%, a notable rise from the 12% reported in the previous year’s quarter.
Li Auto has recently started taking reservations for Mega, with plans for deliveries commencing in February 2024. Notably, Mega boasts an impressive 500-kilometer driving range with a quick 12-minute charging time. Moreover, the enthusiasm among customers remains high, as evidenced by the orders for Mega, which surpassed 10,000 units within two hours of becoming available for reservations. Against this backdrop, let’s look at the Street’s forecast for Li Auto stock.
What is the Forecast for Li Auto?
Four Wall Street analysts cover Li Auto stock and unanimously endorse a Buy recommendation. On November 10, Barclays analyst Jiong Shao reaffirmed a Buy rating on LI stock and raised the price target to $50 from $48. Additionally, Ming-Hsun Lee of Bank of America Securities revised the price target for Li Auto stock to $62 from $61, emphasizing the reduced operating expenses in the third quarter.
As analysts maintain a bullish view, their average price target of $53.75 suggests 30.24% upside potential from current levels.
Bottom Line
Li Auto’s strong delivery numbers, rising sales, efficiency in the production process, and reduction in quality-related costs augur well for growth. Further, the solid demand for the company’s new electric car will likely boost its future volumes and sales. These positives are reflected in analysts’ bullish view of the stock.
