Sales of electric vehicles (EV) remain resilient despite macro challenges. Government incentives to boost EV sales and price cuts by leading automakers are driving volumes, even as fears of an economic downturn persist. However, growing competition in the EV space is impacting the profitability of automakers. We used TipRanks’ Stock Comparison Tool to place Nio (NYSE:NIO), Tesla (NASDAQ:TSLA), and Li Auto (NASDAQ:LI) against each other to find the EV stock which Wall Street finds more attractive.
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Nio (NYSE:NIO)
Nio’s U.S.-listed shares have significantly underperformed rival EV stocks Tesla and Li Auto on a year-to-date basis. The company’s lackluster deliveries in recent quarters, supply chain issues, declining margins, and growing competition in the Chinese EV market impacted investor sentiment.
However, shares have advanced about 17% over the past month due to the solid rebound in June deliveries and expectations of stronger sales in the second half of the year. Nio delivered 10,707 vehicles in June, reflecting a 17.4% year-over-year decline but a solid 74% jump compared to May.
Nio’s June deliveries benefited from new models, mainly the ES6 built on the NT 2.0 platform. The company also launched ET5 Touring in mid-June and commenced the deliveries of the new ES8 in late June. Last month, the company implemented price cuts on its EVs, finally joining the price war triggered by Tesla. Nio has also decided to stop free battery-swapping services for new buyers.
Last month, Deutsche Bank analyst Edison Yu reiterated a Buy rating on Nio with a price target of $13. Yu believes that Nio’s price cuts and the rapid rollout of new NT 2.0-based models could help the company’s sales “rebound considerably” in the second half of 2023, paving the way to generate a volume of 20,000 units per month.
Is Nio a Buy, Sell, or Hold?
With seven Buys and four Holds, Nio stock has a Moderate Buy consensus rating. The average price target of $10.38 reflects a possible downside of 2%. Shares have advanced 8.5% year-to-date.
Tesla (NASDAQ:TSLA)
Earlier this week, Tesla reported better-than-anticipated Q2 revenue and earnings. However, shares fell as the company’s margins continued to decline due to aggressive price cuts to spur volumes.
Tesla’s Q2 revenue grew 47% year-over-year to about $25 billion, while adjusted EPS increased 20% to $0.91. However, the company’s gross margin fell 682 basis points compared to the prior-year quarter to 18.2%, reflecting the impact of price cuts to boost demand. Further, the Q2 operating margin contracted 493 basis points to 9.6%.
When questioned about the direction of margins during the Q2 earnings call, Tesla CEO Elon Musk contended that near-term variances in gross margin and profitability are “minor” relative to the long-term prospects.
On Thursday, Goldman Sachs analyst Mark Delaney called Tesla’s Q2 results “solid” but cautioned that margins could remain under pressure in the intermediate term if the company lowers its EV prices further to drive higher volumes. The analyst reiterated a Hold rating on TSLA with a price target of $275 and stated that his positive long-term view on Tesla is already priced into the stock following its year-to-date rally.
Is Tesla a Buy or Sell?
Wall Street’s Moderate Buy consensus rating on Tesla stock is based on 12 Buys, 12 Holds, and four Sells. The average price target of $258.20 does not indicate further upside. Shares have skyrocketed 111% so far in 2023.
Li Auto (NASDAQ:LI)
Shares of Chinese EV maker Li Auto have jumped more than 81% since the start of this year. The company impressed investors with strong June deliveries of 32,575 vehicles, marking an increase of 150% year-over-year. The company’s June deliveries were higher than rivals Nio and XPeng (NYSE:XPEV).
Overall, Li Auto’s Q2 deliveries increased 202% to 86,533. The company highlighted that deliveries in the first half of this year surpassed deliveries in full-year 2022.
Looking ahead, Li Auto is targeting 40,000 monthly deliveries in the fourth quarter. It is gearing up to launch its super flagship 5C BEV model, called Li MEGA, in Q4 and expects it to emerge as a leading model in the RMB 500,000 and higher price segment in China.
Last month, HSBC analyst Yuqian Ding increased his price target for Li Auto to $43 from $38 and reiterated a Buy rating. The analyst expects the company’s volume momentum to continue beyond Q2 due to “its strong delivery record and value proposition.”
What is the Forecast for LI Stock?
Li Auto earns Wall Street’s Strong Buy consensus rating backed by seven Buys and one Hold. The average price target of $40.66 implies 10% upside from current levels.
Conclusion
Analysts are more bullish on Li Auto than Nio and Tesla currently and see higher upside in the stock even after the robust year-to-date rise. Given the solid momentum in Li Auto’s sales volumes, expectations are high for the company to turn profitable this year.
As per TipRanks’ Smart Score System, Li Auto scores an eight out of 10, implying that the stock could outperform the broader market over the long term.
