Li Auto (NASDAQ:LI) stock has been one of the standout performers in the Chinese electric vehicle pack, with gains of nearly 74% over the past year. In contrast, NIO (NYSE:NIO) has dropped by nearly 40%, and XPeng (NYSE:XPEV) has barely kept its head above water, with a 3% gain during this period. Still, LI’s share price dropped by nearly 5% on Friday, and the stock is down a further 7% in the early session today. So, is this just another bout of profit taking in the stock? Some analysts seem to think so, but there were some catalysts worth mentioning that sent the price lower.
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Let’s begin with Li’s recent outperformance. After a nearly 22% rally over the past three months, LI’s share price had reached its highest level in nearly five years. The stock had previously hovered above the $46 mark in August 2023. A bout of profit-taking was anticipated after this run-up.
However, overall EV delivery numbers from Chinese names have largely failed to live up to expectations this month, which could have acted as a negative catalyst. For February, LI delivered 20,952 vehicles, a far cry from the 50,353 mark it notched in December 2023. It expects to make 50,000 unit deliveries this month.
In addition, the launch price for the company’s LI MEGA all-electric multi-purpose vehicle came in a tad higher than expected. While LI expects the model to be a top seller in its price category, Huawei-backed Seres is making rapid inroads in the SUV market. Finally, the U.S. Government’s probe into potential national security risks from Chinese EVs adds another dimension of risk for the stock.
Despite these challenges, LI’s financial outlook remains optimistic. The company expects its top line to rise by about 66.3% to 71.3% year-over-year for the first quarter.
What Is the Target Price for Li Auto Stock?
Overall, the Street has a Strong Buy consensus rating on Li Auto alongside an average price target of $55.31. The stock is currently trading at a price-to-earnings multiple of about 28.2.
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