Should You Buy Li Auto Stock While It's 50% Below Its All-Time High?

Core Viewpoint - Li Auto's stock is currently trading significantly below its peak, presenting a potential undervaluation opportunity amidst challenges in the EV market and broader economic conditions [2][11]. Company Overview - Li Auto, a Chinese automaker specializing in plug-in hybrid electric vehicles (PHEVs) and battery-powered electric vehicles (BEVs), went public in 2020 and saw its stock rise from $11.50 to a high of$46.65 in 2023 [1][2]. - The company has delivered a total of 376,030 vehicles in 2023, with a year-over-year growth of 182% [4]. Market Position - Li Auto differentiates itself by focusing on PHEVs, which are more practical for certain consumers, and by establishing its own network of supercharging stations, totaling 894 stations with 4,286 charging stalls across China [4][5]. - The company has turned profitable on a GAAP basis in 2023, unlike some competitors such as Nio and Xpeng, which remain unprofitable [6]. Financial Performance - Li Auto's enterprise value is 80.5 billion yuan ($11.1 billion), which is less than its forecasted sales for the next year, indicating potential undervaluation [3]. - Analysts project an 18% revenue increase for 2024, but a 35% drop in net income due to production ramp-up challenges and a competitive pricing environment [9]. - For 2025, revenue and net income are expected to rise by 32% and 55%, respectively, as the company overcomes current challenges [10]. Challenges and Risks - The stock has retreated approximately 50% from its peak, influenced by a cooling EV market, rising interest rates, and China's economic slowdown [2][11]. - Li Auto's vehicle margins have been affected by a price war in the EV sector, with margins fluctuating from 21.5% in 2023 to 19.3%, 18.7%, and 20.9% in the first three quarters of 2024 [8]. - The company faces fewer tariff headwinds compared to competitors expanding into Western markets, but could still be impacted by U.S. and European export restrictions [7].