Among the Electric Vehicle companies in China, Li Auto (NASDAQ:LI) stock is the least followed by the bullish investors.
LI stock has the highest short interest and lowest market capitalization compared to NIO (NYSE:NIO) and XPeng (NYSE:XPEV).
In June, Li Auto posted 7,713 Li ONE deliveries, up 320.6% year-on-year and up 78.4% sequentially.
It also reported a record high of over 10,000 new orders. The company has 97 retail stores in 64 cities. It has 167 servicing centers to support customers in 127 cities.
It offers customers authorized body and paint shop services. Its support for customers is not unnoticed: sales are very strong and will probably grow.
A Closer Look at LI Stock
In the first quarter, Li Auto posted total revenue of $545.7 million, up by 319.8% Y/Y. The vehicle margin was 16.9%, up from 8.4% Y/Y.
Gross profit improved sharply to $94.1 million, up by 802.9% Y/Y. Despite the strong figures, Li lost $62.2 million in the quarter. Cash flow was also $141.4 million. As a growing firm, the negative free cash flow should not concern investors.
Investors may expect continued quarterly losses as the company invests in the business, spends on capital, and supports the growth of its initiatives.
Most importantly, it will need to keep selling more EV units throughout the next two years. Eventually, revenue will outpace costs and lead to a profit.
In May, Li released the 2021 Li ONE. This vehicle has navigation on ADAS (advanced driver-assistance systems ) as a standard configuration.
The EV has an incredibly good range of 1,080 kilometers. At RMB338,000 (or USD 52,100), customers get premium features. Li started deliveries of the Li ONE on June 1.
Positive word of mouth from customers should help accelerate Li’s sales in the coming quarter. The vehicle offers a fully-featured ADAS without charging a subscription.
Conversely, XPeng customers who want the XPilot upgrade must have a subscription. This will lift XPeng’s operating income but may sway customers to buy a Li ONE EV instead.
The components in Li’s ADAS solution include two Horizon Robotics Journey 3 AI accelerating processors. It also has five fifth-generation millimeter-wave radars, supplied by Bosch.
Li also gets to claim the title of having the first production model in the world with an 8-megapixel front-view camera having a 4K definition.
The feature list does not stop there.
The EV has a fully automated parking assist (FAPA) feature, automatic adaptive acceleration, and lane changing through its NOA Navigation Support System.
All five analysts offering a one-year price target on Li Auto rate the stock as a “buy.”
The average price target is $45.90 (per Tipranks). Analysts are similarly bullish on XPeng with a $51.10 price target and Nio, with a $63.63 price target.
Li scores 55/100 on quality but poorly on valuation. The company is not yet profitable as it spends to grow its business. Eventually, Li Auto will achieve an economies of scale.
Li shares did not fall by much after regulators cracked down on DiDi Global (NYSE:DIDI) on July 4.
When bellwether stock Alibaba Group (NYSE:BABA) fell by over 10% in the first week of July because of DiDi, Li’s resiliency on the markets was notable.
Li Auto is not yet profitable and should be treated as a speculative investment. The stock has a weak quality score of 55/100.
The value score is 40/100, according to Stockrover. Those scores will not improve until Li starts posting profits.
Since the firm is still in the growth phase, its costs will exceed revenue for a while longer.
Nio and XPeng both enjoyed a strong run-up. This time, Li Auto has a chance to outperform them both and to come out ahead with a bigger market capitalization.
Initial demand for Li’s new EV may help the stock get there.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.