4 Reasons Why Li Auto Is Poised For 48% Compounded Annual Growth Over By 2025

Li Auto Inc. LI, which is one of the three U.S.-listed Chinese EV startups, is poised to outperform in the near- to medium-term, according to an analyst at BofA Securities.

The Li Auto Analyst: Ming Hsun Lee initiated coverage of Li Auto with a Buy rating and $42 price target.

The Li Auto Thesis: Li Auto volume sales will likely grow at a compounded annual growth rate of 48% over 2020-25, helped by a quartet of factors, Hsun Lee said in a note.

• EV penetration is rising in China, with a particularly strong demand for luxury/premium vehicles.
• Li Auto has a solid model pipeline.
• Li Auto is seeing rapid expansion of its point of sales.
• Extended range EVs are seen as a solution to users' concern regarding range, creating a solid demand for the company's vehicles in China's EV market.

Related Link: Will Xpeng Or Li Auto Stock Grow More By 2022?

Li Auto has raised about $3.7 billion in 2020, which is sufficient to invest in tailor-made autonomous driving solutions, vehicle connectivity, and BEV/charging technology to improve user experience further, Hsun Lee said. This will help the company increase its market share from 3% in 2020 to 6% in 2023.

BofA expects the company to launch one model a year over 2022-24, and to have a presence in the full-size and compact SUV segments. The company could turn net income and FCF positive in 2022 and 2023, respectively.

Li Auto Price Action: Li Auto shares rallied more than 6.6% on Wednesday. The stock pared some of those gains, trading around $31.35 at publication time.