Li Auto Earnings Missed Estimates. Why Its Stock Is Soaring. - Barron's

Li Auto reported earnings on Wednesday.
Courtesy Li Auto

Chinese electric-vehicle maker Li Auto ‘s first-quarter sales beat expectations, and its earnings report looks like it could be enough to break the stock out of its recent funk.

Li Auto (ticker: LI) shares were up 10% in morning trading. The S&P 500 and Dow Jones Industrial Average were up about 0.1%.

For the first quarter, the company generated about $546 million in sales and lost 3 cents per American depositary receipt, or ADR, on an adjusted basis. (An ADR is, essentially, U.S. stock of a foreign company.) Wall Street was looking for $530 million in sales and a 2-cent loss. The penny miss on the bottom line doesn’t look like a big deal. Li is still growing fast, with sales—and expenses—expanding rapidly year over year.

Deliveries in the first quarter, which were previously disclosed, came in at 12,579, down from the 14,464 vehicles delivered in the fourth quarter of 2020. The Lunar New Year holiday, as well as a global automotive semiconductor shortage, weighed on delivery figures.

Looking ahead, Li expects to deliver between 14,500 and 15,500 vehicles in the second quarter. At a midpoint of 15,000, Li might have trouble reaching analysts’ consensus sales estimate of $730 million for the period. The company generated about $630 million in sales in the 2020 third quarter, when deliveries came in just below 14,500. But its vehicle mix has been improving as the company’s cars add new features.

Li recently launched the 2021 LI ONE SUV with more per-charge range and upgraded driver assistance features.

Li is the last of the three large, U.S.-listed Chinese EV makers to report earnings. NIO (NIO) and XPeng (XPEV) both beat analyst sales projections, and both guided to increasing deliveries quarter over quarter. NIO stock gained about 2% after reporting first-quarter numbers, but XPeng stock fell almost 5%.

Year to date, all three stocks are struggling. NIO shares are down 26%, while Li and XPeng shares are both off about off 31%. Many richly valued, high-growth stocks have struggled in 2021 as interest rates have risen. Investors have rotated into cyclical names with the global economy recovering from its Covid-induced slump. Shares of Tesla (TSLA), the most valuable EV company in the world, have fallen 14% year to date.

Car companies, including Li, have faced production constraints because of a semiconductor shortage. That hurts faster-growing auto companies more. Investors want to see growth and, apparently, haven’t been willing to look past the industrywide issue.

Li management hosts a conference call at 8 a.m. ET to discuss results. Investors and analysts will be anxious to hear about Chinese EV demand as well as how the global automotive semiconductor shortage is affecting production.

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