What happened
Climbing 16% in October, shares of Li Auto (NASDAQ:LI), the China-based manufacturer of electric vehicles (EV) showed no signs of pumping the brakes in November. Instead, the stock skyrocketed 78% last month, according to data from S&P Global Market Intelligence. After learning of the strong consumer demand for the company's Li ONE, investors bought up shares following the company's encouraging third-quarter earnings report and enthusiasm from Wall Street for the stock.
So what
The month began on an auspicious note for investors as Li Auto reported 3,692 deliveries of its Li ONE SUV -- a 5.4% increase over that which it delivered in September. In addition, Li Auto reported that it saw unprecedented demand for its vehicles, stating in its press release that it "achieved strong orders, setting a new monthly record."
Image source: Getty Images.
Additional electrifying news came in the form of the company's Q3 earnings report, which revealed a quarterly record of Li ONE deliveries: 8,660. Besides the company's deliveries, investors responded to the positive signs regarding Li Auto's financials. On the top line, the company reported $370 million for the third quarter, representing a quarter-over-quarter increase of 29%. And while the company reported another net loss, shareholders shrugged it off, favoring instead the company's strong free cash flow of $110 million, a 149% increase over that which it reported in Q2. Management's Q4 outlook also electrified investors' enthusiasm. The company forecasts revenue of about $479 million -- notably higher than the consensus estimate of $342 million.
Li Auto's impressive Q3 earnings report also moved Wall Street to act. On Nov. 16, an analyst with Citi, Jeff Chung, upgraded the stock to buy from neutral and assigned a price target of $45.60, according to Thefly.com. Chung's rating is especially noteworthy considering that he had rated the stock neutral and assigned a price target of $27 on Nov. 4.
Now what
One of the newer faces on the EV landscape, investors may be drawn to Li Auto as an alternative to NIO Limited, another Chinese EV manufacturer that has seen its stock double in 2020. There's certainly no guarantee, however, that Li Auto's stock will enjoy the same success. So while growth stock investors may be drawn to it, only those with high tolerances for risk should consider parking this stock in their portfolios.
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December 09, 2020 at 05:29AM
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Why Shares of Li Auto Jumped 78% in November - Motley Fool
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