On Friday, Barclays (LON:BARC) adjusted its outlook on Li Auto (NASDAQ:LI), reducing the price target to $39 from the previous $56, while continuing to endorse the stock with an Overweight rating.
The adjustment follows the electric vehicle (EV) manufacturer's announcement earlier today that it is lowering its delivery projections for the first quarter of 2024, citing underwhelming sales of its newly launched MEGA model, a battery-electric vehicle (BEV) powered multi-purpose vehicle (MPV).
Li Auto has revised its total delivery guidance for Q1 from the initial range of 100,000-103,000 vehicles to a new estimate of 76,000-78,000 vehicles. Additionally, the company has scaled back its growth forecast for 2024 deliveries from the 73-126% year-over-year growth previously anticipated, to a more modest 50-70% increase.
This recent development marks a rare misstep for Li Auto's management, which has been recognized for its nearly unblemished execution track record in recent years. The setback with the MEGA launch could potentially undermine investor confidence in the company's ability to successfully introduce other BEV models slated for release later in the year.
Despite the lowered guidance, Barclays remains optimistic about Li Auto's capacity to navigate the challenges presented by the MEGA model. The firm anticipates that Li Auto will address the operational and public relations issues surrounding the vehicle in the upcoming quarters.
Barclays acknowledges that no company, especially in the highly competitive Chinese EV market, can expect an uninterrupted path to success.
The Chinese EV landscape is intensifying with tech giants like Huawei and Xiaomi (OTC:XIACF) entering the fray, signaling a trend towards industry consolidation expected within the next three to five years. Nonetheless, Barclays maintains a positive outlook on Li Auto based on the company's strong performance history, excluding the recent launch hiccup.
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