On Tuesday, BofA Securities maintained its Buy rating and $41.00 price target for Li Auto (NASDAQ:LI), despite revising sales volume forecasts for the second quarter of 2024. The firm adjusted its previous estimate of 110,000 units down to 106,000 units due to a slower demand for the Mega model and the time required for the L6 model to ramp up production.
The analyst from BofA Securities indicated that the sales volume for the Mega model is now projected at 8,700 units for the first half of 2024 and 10,600 units for the second half, which is below Li Auto's expectation of 2,000 units per month in the first half and 4,000 to 5,000 units per month in the latter half of the year.
Despite the downward revision, the forecast for the L6 model remains the same, with an anticipated sales volume growth of 25,500 units in the second quarter, accounting for 24% of the total vehicle sales volume, a slight increase from the previous estimate of 23%.
The gross profit margin (GPM) for the L6 is expected to be below the company's average initially due to the smaller scale and the time needed to improve production efficiency. This will likely result in a lower blended GPM for Li Auto in the second quarter. However, the GPM is expected to improve in the second half of 2024, according to the BofA Securities analyst.
The analyst's comments reflect a cautious but still positive outlook on Li Auto's financial performance in the near term. The firm believes that while the mix change and price cuts in the second quarter will pose challenges, the company's gross profit margin will recover in the latter half of the year as sales volumes increase and production efficiency improves.
InvestingPro Insights
In light of the recent analysis by BofA Securities on Li Auto (NASDAQ:LI), real-time data and insights from InvestingPro further enrich the outlook for the company. With a market capitalization of $28.65 billion and a strong revenue growth of 173.48% over the last twelve months as of Q4 2023, Li Auto shows a robust financial position. The company's P/E ratio stands at 16.44, suggesting a reasonable valuation in the current market.
Two InvestingPro Tips that are particularly relevant to this analysis include Li Auto's ability to hold more cash than debt on its balance sheet and the company's valuation implying a strong free cash flow yield. These factors contribute to the company's financial stability and potential for growth, aligning with the positive sentiment from BofA Securities despite near-term challenges.
Moreover, Li Auto's stock has experienced significant price volatility, with a 6-month price total return of -32.25% as of the latest data. Yet, analysts predict the company will be profitable this year, which could signal a turnaround for investors looking for long-term opportunities.
For those interested in deeper analysis and additional insights, there are 9 more InvestingPro Tips available at https://www.investing.com/pro/LI. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, offering a comprehensive view of Li Auto's financial health and future prospects.
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