Li Auto Analyst Reacts To China EV Player's Q4 Earnings Beat: 'Expect 2023 To Turn Profitable'

Li Auto Inc LI shares traded slightly lower on Monday morning after the Chinese electric vehicle maker reported a first-quarter earnings beat, but Bank of America analyst Ming Hsun Lee said there's plenty of upside ahead for Li shares.

BofA's Take On Li Auto: Hsun Lee reiterated a Buy rating and $34 price target for Li on Monday and increased the 2023 EPS estimate from a $1.12 per-share loss to a 7-cent profit. He said the company's strong model pipeline, impressive free cash flow generation and better profit margin management than Chinese EV peers make the stock a compelling long-term investment.

"We revise 2023/24E volume sales forecast by +1%/+1% to reflect our more positive view on volume sales. We now expect 2023 to turn profitable on GAAP basis," Lee said.

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Li guided for first-quarter deliveries of between 52,000 and 55,000 units. In early February, Li launched its L7, a mid-to-large-sized, five-seat extended range SUV. Once all three versions of the new model are available for delivery, the company expects to reach 30,000 vehicle deliveries per month by the end of the second quarter. Li management is also expecting to achieve 20% market share in the premium Chinese EV market this year.

Lee said the timing of Li's new battery EV model will likely depend on exactly when Qualcomm Inc QCOM releases its 8295 chip, likely in late 2023.

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Benzinga's Take: Rising interest rates have put even more pressure on unprofitable EV startups to demonstrate a viable, scalable business model in coming years. Li appears to be positioned to take a major financial step in 2023 if it can complete its first year of GAAP profitability.

Photo courtesy of Li Auto.