How Li Auto Stock Could 2x

Core Viewpoint - Li Auto, a leading player in the Chinese electric vehicle (EV) market, reported a year-over-year increase in vehicle deliveries for October 2024, but faced challenges in maintaining sales momentum compared to previous months and competition in the market [1][2]. Company Performance - Li Auto delivered 51,443 vehicles in October 2024, representing a 27.3% increase year-over-year, but a decrease from 53,709 vehicles in September 2024 [1]. - Year-to-date deliveries reached approximately 393,255 vehicles, marking a 38% increase compared to the previous year [1]. - The company’s vehicle margin for Q3 2024 was 20.9%, down 0.3% from the previous year [3]. - Li Auto's average selling prices declined by about 15% year-over-year to RMB 270,000 during the most recent quarter [2]. Competitive Landscape - Li Auto remains the leader in the premium EV segment in China, targeting the RMB 200,000 and above market for seven consecutive months [1]. - The competitive environment in the Chinese EV market is intense, with over 100 brands, impacting average selling prices and margins [2]. - Nio and XPeng, competitors in the market, reported deliveries of 20,976 and 23,917 vehicles respectively in October, with Nio showing a 30% year-over-year growth [1]. Market Conditions - The Chinese economy is experiencing weak growth, influenced by a downturn in the real estate market and slow recovery from COVID-19 lockdowns, affecting consumer spending [3]. - A recent government stimulus plan, including interest rate cuts and fiscal support, may help boost consumer spending [3]. Stock Performance - Li Auto's stock is down approximately 28% year-to-date, with inconsistent returns over the past few years [2][4]. - The stock trades at about $26 per share, approximately 1.3 times consensus 2024 revenues, which is considered not expensive given projected revenue growth of over 17% this year and about 30% next year [4]. - If investors value Li Auto at about 2 times forward revenues, there could be significant upside potential for the stock [4].