Goldman Sachs placed its bets on Li Auto Inc
Analyst Tina Hou's initiation of Li Auto with a Buy rating and a price target of $52.90 indicated a potential 52.9% upside over the next year for this Chinese electric vehicle (EV) manufacturer.
Drivers For Future Growth
Li Auto is gearing up for a robust growth phase, as evidenced by soaring monthly deliveries and the imminent launch of a new fully electric model.
"We expect the competitive positioning of BEV [battery electric vehicle] models and deepening sales network to drive another leg of growth for Li Auto," noted Hou.
Li Auto was a "leading pure NEV player" with 5% of the NEV, or new energy vehicle, market share in China, Hou said. It distinguished itself as one of the few profitable EV players in the country. Its innovation, incorporating a fuel tank to charge the battery and extend driving range, captured the attention of the rapidly expanding Chinese electric car market, alongside renowned brands like BYD Co Ltd
Catalysts Fueling LI Stock
The positive outlook is fueled by numerous catalysts, including:
- Upcoming model launches
- Advancements in its advanced assisted-driving system (City NOA program)
- Impending quarterly earnings report due in late February.
The company's ambitious plans to unveil multiple new models in 2024, culminating in a portfolio of eight models by year-end, reinforce Goldman's bullish stance. Moreover, with an 182% year-on-year increase in car deliveries in 2023, totaling over 50,000 cars in December alone, Li Auto is poised for accelerated growth.
Potential Risks
Potential risks such as fluctuating market demand and intensified competition could dampen Li Auto's prospects.
Goldman's neutral rating for Nio also reflects caution due to its decreasing market share and relatively mature product lineup.
Despite these challenges, Li Auto's aggressive expansion strategies, innovative offerings and anticipated revenue streams from BEV models position it as a frontrunner in China's booming EV market. Investors eyeing substantial growth opportunities in the EV sector might find Li Auto a compelling addition to their portfolio.
