Ahead of Li Auto Inc.’s (NYSE:LI) third-quarter earnings call, analyst sentiment for the Tesla Inc. (NASDAQ:TSLA) rival has turned bearish.Biggest-Ever Revenue DeclineAnalysts predict that the automaker will report its biggest-ever revenue decline, with sentiments showcasing an expected 38% year-on-year dip for the automaker, Bloomberg reported on Tuesday. The decline is expected to be Li Auto's steepest since its listing on the New York Stock Exchange in 2020.Li Auto delivered over 93,211 vehicles in Q3, r ...

Core Viewpoint - Li Auto is transitioning from hybrid vehicles to fully electric models, unveiling the Li i8 SUV, which is expected to enhance investor confidence in 2025 [1][2]. Company Overview - Li Auto has emerged as a leading luxury car brand in China, delivering 500,508 vehicles in 2024, significantly outperforming competitors XPEV and NIO, which delivered 221,970 and 190,068 units respectively [2]. Stock Performance - Over the past 12 months, Li Auto's shares have decreased by 37.5%, underperforming the Zacks Auto, Tires and Trucks sector's decline of 0.7% and the S&P 500's gain of 18.5% [3]. - In the same period, XPEV shares increased by 80.7%, while NIO shares fell by 21.4% [3]. Financial Metrics - Li Auto's shares are currently considered overvalued, with a Value Score of C, and a forward 12-month price/sales ratio of 1.12x, exceeding its median of 0.94x and the Zacks Automotive – Foreign industry's 0.59x [6]. - The average selling price (ASP) of Li Auto's vehicles is declining due to product mix changes, impacting revenue growth despite higher delivery numbers [9]. Expense Analysis - Selling, general and administrative (SG&A) expenses rose by 32.1% year-over-year, driven by increased employee compensation, while R&D expenses decreased by 8.2% year-over-year in Q3 2024 [9]. Strategic Initiatives - Li Auto is expanding its supercharging network, planning to build over 1,200 stations by the end of 2025, which will cover 90% of national highways, although this requires significant capital investment [10]. Market Challenges - The company faces macroeconomic uncertainties, potential tariff increases, and changing government policies regarding EV subsidies and market regulations, which could hinder long-term growth [11]. - The Zacks Consensus Estimate for Li Auto's 2025 EPS is currently $1.70, reflecting a decrease of 2 cents over the past month [11]. Conclusion - Despite strong delivery growth and a shift to fully electric vehicles, Li Auto is encountering substantial challenges that may impact its growth trajectory and stock performance [12].