Li Auto (LI) Could Be 32% Undervalued After August Deliveries And New Model Plans
Li Auto (NasdaqGS:LI) is back in the spotlight after reporting August deliveries of 37,679 vehicles and unveiling plans to launch the Li MEGA MPV and Li i9 SUV, along with a broader technology rollout.
Li Auto shares have picked up slightly in the short term, with a 1 week share price return of 2.23% after the August delivery update and product launch plans. However, the stock is still down 28.29% year to date on a share price basis, and total shareholder returns over 1 and 3 years have been deeply negative. This suggests that recent momentum is emerging from a weak longer term base as investors reassess growth prospects and risks.
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Li Auto is pushing ahead with new models, updated guidance and a large buyback while the stock remains well below its levels of recent years. Does that combination of business developments and weak long-term returns suggest a fair price today?
Most Popular Narrative: 31.8% Undervalued
The most followed valuation narrative puts Li Auto’s fair value at $18.14 compared with the last close at $12.37. This frames a sizeable gap that hinges on execution in electric vehicles, software and international expansion.
The company's ongoing transition from extended-range vehicles (EREVs) to pure battery electric vehicles (BEVs) including successful launches of the Li MEGA and Li i8, and the upcoming Li i6 positions Li Auto to capture expanding market share as Chinese middle-class consumers upgrade and EV adoption accelerates, directly supporting long-term revenue growth and total addressable market expansion.
Want to understand why this narrative still sees upside despite recent share price declines and negative total returns? The projected revenue path, margin reset and future profit multiple assumptions work together in a very specific way. The details could change how you think about Li Auto’s current price.
Result: Fair Value of $18.14 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Li Auto still faces pressure from higher R&D and capital spending, as well as intense NEV competition, which could squeeze margins and weaken the bullish valuation case.
Find out about the key risks to this Li Auto narrative.
Another View on Li Auto’s Valuation
The main narrative sees Li Auto as undervalued based on expected earnings and profit margins. A different lens uses its current P/S ratio of 0.8x versus the US Auto industry at 0.6x and a fair ratio of 0.7x. That points to a richer pricing. Which signal do you give more weight to?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
With sentiment on Li Auto clearly mixed, it makes sense to move fast and check the underlying drivers yourself before forming a view. A good place to start is understanding why some investors still see upside through 2 key rewards.
Looking for more investment ideas beyond Li Auto?
If you stop with Li Auto, you could miss other stocks that better match your goals. Put a few minutes into scanning fresh opportunities that fit your criteria.
- Spot early stage potential by reviewing 22 elite penny stocks with strong financials that already show stronger financial footing than many tiny peers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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