BofA Securities has adjusted its outlook on Li Auto (NASDAQ: NASDAQ:), increasing the price target to $31 from the previous $30 while reiterating a Buy rating on the stock. This adjustment follows the release of the company’s second-quarter financial results for 2024.
Li Auto reported a revenue of RMB 31.7 billion, marking an 11% year-over-year increase and a 24% rise from the previous quarter. Despite a decline in gross profit margin (GPM) by 2.3 percentage points year-over-year and 1.1 percentage points from the last quarter, the GPM of 19.5% was still slightly above the forecasted 19.4%.
The decrease in GPM was attributed to a drop in average selling prices, largely due to a higher sales mix of the L6 model and pricing discounts. Operating expenses to sales ratio stood at 18.0%, which is 1.9 percentage points higher compared to the same period last year but 4.9 percentage points lower than the previous quarter. The quarter-over-quarter decrease was a result of controlled employee compensation and a reduction in headcount.
Li Auto also surpassed earnings expectations, with non-GAAP earnings reaching RMB 1.5 billion in the second quarter, an 18% increase from the previous quarter. This figure notably exceeded the estimate of RMB 697 million, fueled by lower operating expenses.
In other recent news, Li Auto reported strong second-quarter results for 2024, with significant growth in sales and market share. The company delivered over 108,000 vehicles during this period, representing a year-over-year growth of 25.5%.
Total revenues reached RMB31.7 billion, marking a 10.6% increase from the previous year, with a solid gross margin of 19.5%. However, the net income saw a decline of 52.3% year-over-year but improved by 86.2% from the previous quarter.
Looking ahead, Li Auto is optimistic about delivering over 500,000 vehicles by the end of the year. The company also plans to introduce multiple 800-volt high voltage pure electric vehicles next year. Despite a significant decrease in net income, the company maintains a strong cash position with RMB97.3 billion as of June 2024, and expects a continued positive free cash flow from the third quarter onwards.
InvestingPro Insights
Following the recent financial results from Li Auto, InvestingPro data highlights the company’s significant market presence with a market capitalization of $22.51 billion. Despite recent market volatility, which has seen the stock price take a substantial hit over the last six months with a 61.2% decline, analysts remain optimistic about the company’s future. This is further supported by a strong revenue growth rate of 79.66% over the last twelve months as of Q2 2024, showcasing the company’s rapid expansion in the Automobiles industry.
Moreover, Li Auto’s financial health is underlined by an InvestingPro Tip that points out the company holds more cash than debt on its balance sheet, providing a solid foundation for future growth. In addition, the company’s valuation implies a strong free cash flow yield, which could be an attractive point for investors seeking companies with the potential for high cash generation relative to their share price. For those interested in a deeper dive into Li Auto’s financials and further InvestingPro Tips, there are an additional 12 tips available on the InvestingPro platform.
The adjusted P/E ratio for Li Auto stands at a reasonable 13.22, and the company is trading at a low revenue valuation multiple, which may appeal to value-oriented investors. While the stock is currently trading near its 52-week low, this could present a buying opportunity for those who believe in the company’s long-term prospects, especially considering that analysts predict profitability for the current year.
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