LI stock is the IBD Stock Of The Day as the Chinese EV startup pauses near highs after a huge rally fed by strong earnings and soaring electric-vehicle sales.
China-based Li Auto makes the Li One and L9, premium electric SUVs. Both models employ "range extenders," gas engines used to recharge EV batteries while driving. Its Q2 EV sales rose 63% year over year, continuing a hot growth streak, but fell quarter over quarter due to the chip shortage and supply disruptions.
Chinese startups Li Auto, Nio and Xpeng are challenging Tesla and BYD in the world's largest car market.
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LI Stock Digesting Gains Near Highs
The IBD 50 stock rose 2.8% to 38.03 on the stock market today.
Li Auto stock is consolidating near highs after a seven-week spike from early May to late June, which saw shares more than double in value. The EV stock shows fairly tight trading on the weekly MarketSmith chart, a positive sign. In addition its relative strength line remains near highs. A rising RS line is a sign of outperformance vs. the wilting S&P 500.
Li's consolidating above, and after just breaking through, its highs from December and last July. It's possible that the consolidation will form into a new base.
On Wednesday, IBD added LI stock to SwingTrader after it found support near its 21-day line.
A 98 Relative Strength Rating means that Li Auto has outperformed 98% of all stocks in IBD's database over the past year. China EV giant BYD boasts a 96 RS Rating. But Nio and Tesla have poor RS ratings amid various challenges in the last year.
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LI earns a superior IBD Composite Rating of 94 out of 99. The Comp rating combines key fundamental and technical metrics in a single easy-to-use score.
Li's middling 76 EPS Rating reflects a choppy quarterly earnings record. But it looks strong compared with many EV startups that fail to deliver their first car and live up to hype, let alone generate revenue and profits.
On a per-share basis, Li Auto earnings came in at seven cents in the latest quarter, defying views for a seven-cent loss. Revenue vaulted 161% year over year.
That comes after Li Auto nearly tripled 2021 sales.
Amid supply headwinds and tough comps, Wall Street expects Li's sales growth to slow in 2022 and 2023, to a still-robust 84%.
While Li Auto already flaunts a few profitable quarters, analysts expect Li to turn profitable on an annual basis for the first time in 2023. It should earn 28 cents per ADR vs. a 28-cent loss in 2020, FactSet shows.
Li Auto Stock Fueled By L9 SUV Orders
The IBD 50 stock shows seven quarters of rising fund ownership, according to the IBD Stock Checkup tool. As of June, 636 funds owned LI stock, up 2% from March.
On the product-line front, Li Auto recently unveiled the L9 SUV and plans to begin deliveries in August. LI stock peaked on June 24, as the company touted huge orders for the L9, its second "extended-range" EV. The range extension system aims to ease "range anxiety" among EV buyers in parts of China where charging stations are scarce.
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Among its advanced features, the L9 has an autonomous driving system. The EV racked up 30,000 orders within three days of reservations opening up.
China EV sales more than doubled in 2021 but have come under some strain this year, amid Covid and supply disruptions.
