Shares of electric vehicle (EV) makers have significantly declined this year due to fears of a global economic downturn and macroeconomic challenges. However, several analysts are looking beyond the near-term headwinds and focusing on the solid demand backdrop for EVs. Using TipRanks’ Stock Comparison Tool, we placed Li Auto (NASDAQ:LI), Tesla (NASDAQ:TSLA), and Nio (NYSE:NIO) against each other to pick the EV stock that Wall Street expects to generate the highest returns.
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Aside from growing demand, EV makers are also expected to benefit from the favorable policies being implemented by several countries, like the Inflation Reduction Act (IRA) in the U.S., to boost EV adoption.
Li Auto (NASDAQ:LI)
The impact of China’s Zero COVID policy on the supply chain and production of EV makers was immense, and Li Auto was no exception. Last month, the company disappointed investors when it lowered its Q3 delivery outlook to 25,500 vehicles from the previous outlook range of 27,000 to 29,000 units, citing supply chain disruptions.
However, earlier this month, Li Auto reported Q3 deliveries of 26,524 vehicles, which reflected a 5.6% year-over-year growth and was better than the company’s estimate, thanks to the strong rebound in September and the robust demand for L9 SUVs. The company also disclosed that it received positive feedback for its latest models – the Li L8 and Li L7. The delivery of Li L8 is expected to begin in November, and that of Li L7 will start in Q1 2023.
Is Li Auto Inc. Stock a Buy?
Following the launch of the L8 SUV, Goldman Sachs analyst Fei Fang stated that he feels Li Auto stands apart from the broader China auto industry due to its innovative EV models.
Fang stated, “The success of Li ONE illustrates the company’s understanding of consumer needs, operational capability as well as brand establishment, and it is leveraging these to its next generation products of EREV/BEV models with evolving autonomous driving technologies.”
Fang reiterated a Buy rating on Li Auto stock with a price target of $46.
Li Auto stock scores the Street’s Strong Buy consensus rating based on seven unanimous Buys. The average LI stock price target of $73.29 implies a whopping 287% upside potential. Shares have tanked 41% year-to-date.
Tesla (NASDAQ:TSLA) Stock
Tesla’s upgrade to its Shanghai facility helped it bounce back strongly after COVID-led lockdowns disrupted the company’s production. The EV pioneer produced 365,923 vehicles in the September quarter. However, Q3 deliveries of 343,830 vehicles failed to surpass the Street’s estimates.
The company is scheduled to announce its Q3 results after the markets close on October 19. Analysts expect Q3 revenue to grow nearly 60% year-over-year to $21.96 billion, while EPS is expected to increase 63% to $1.01 (EPS figure of $0.62 for the prior-year quarter takes into account the 3:1 stock split).
Is Tesla a Buy Right Now?
Goldman Sachs analyst Mark Delaney prefers Tesla and General Motors (GM) due to their advanced driver-assistance system (ADAS)/Autonomous Vehicles (AV) technology and the benefits of the IRA.
Delaney expects Tesla’s 4Q deliveries to come in at 461,000, which is above the Street’s forecast of 425,000 to 450,000. He expects Tesla to gain from a strong order backlog and improving supply chain. However, Delaney cautioned that volumes might be impacted by slowing global demand due to macro pressures and the possibility of some U.S. customers delaying purchases until 2023 to utilize the IRA benefits.
Overall, Wall Street is cautiously optimistic about Tesla stock with a Moderate Buy consensus rating based on 19 Buys, seven Holds, and four Sells. The average TSLA stock price target of $325.34 suggests upside potential of 48.3%. TSLA stock has plunged nearly 38% so far this year amid a broader market sell-off and the distraction surrounding the Musk-Twitter deal.
Nio (NYSE:NIO) Stock
Like its other EV peers, Nio ramped up its production after the easing of COVID-19 restrictions in China. Earlier this month, the company reported deliveries of 10,878 vehicles for September, which reflected a 1.9% increase compared to August and year-over-year growth of 2.4%.
Overall, Nio’s Q3 deliveries surged 29.3% to 31,607 vehicles but fell short of the midpoint of the company’s guidance range of 31,000 to 33,000 vehicles.
Looking ahead, Nio looks well-positioned to gain further market share in China, driven by its new models and rapid expansion into the European market. The company’s battery swap technology is also a major advantage.
Is Nio a Buy or Sell?
On Monday, CFRA analyst Jian Xiong Lim expressed his optimism about Nio stock. Lim feels that the company’s EV portfolio expansion (three SUVs and two sedan models in 2022) will help in sustaining its revenue momentum and fuel an improvement in operating leverage.
However, Lim expects Nio’s earnings to continue to be in the red this year and next due to increased research and development spending, higher investments in battery swap/charging stations, and a rise in input and supply chain costs. That said, the analyst projects “net loss to moderate on improving operating leverage.”
On TipRanks, Nio stock scores the Street’s Strong Buy consensus rating based on seven unanimous Buys. At $31.80, the average NIO stock price target implies 160.4% upside potential following a decline of 61.5% so far this year.
Conclusion
Despite fears of an impending recession, analysts continue to be optimistic about several EV names based on growing demand and favorable policies for the accelerated adoption of EVs. Currently, analysts are more bullish on Chinese EV makers Li Auto and Nio than Tesla. Based on the robust demand for Li Auto’s new vehicles, analysts see a higher upside in LI stock than in Nio and Tesla.
