Several positive analyst notes trumpeted the buy case for the company.
Wednesday’s sputtering jalopy of an electric vehicle (EV) stock, Li Auto (LI 10.62%), was a race car tearing down the track on Thursday. The Chinese company’s American depositary receipts (ADRs) rose 10.6% across the trading session not because of any fresh news from the company, but rather on the back of new bullish analyst takes. That share price increase was well higher than the 0.1% rise of the S&P 500 index.
A quick bounce-back
Li Auto’s Wednesday skid (a 16% drop) came on the back of the company’s second-quarter earnings report. The fundamentals disappointed investors even though the EV maker met the consensus analyst estimate for revenue, and beat the estimate for net income.
Some pundits clearly felt this was an overreaction, and reiterated or bolstered their optimistic views of Li Auto’s future today. One was Citigroup‘s Jeff Chung, who reiterated both his buy recommendation on the stock and his $26.20 per-share price target.
In Chung’s estimation Li Auto, which has carved out a niche as a producer of extended range EVs (EREVs), wrote that the company is a first mover in its home market within the segment. He also feels the company will be able to grab market share in the higher-end SUV market “thanks to its competitive products with Level 2.5 ADAS [advanced driver assistance systems] solution and superior functionality.”
The company should continue to be an important player in China
It’s a truism that capital markets frequently overshoot when positive or negative news hits the headlines. Li Auto certainly seemed to be a victim of that on Wednesday. But the company is still a powerful presence in the Chinese vehicle space, and it’s selling into a market obviously hungry for next-generation sustainable mobility. So today’s move back up makes sense.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
