Li Auto shares are down about 16% in February.
Courtesy of Li Auto
Electric-vehicle maker Li Auto kicks off earnings season on Thursday for the Chinese three EV companies, which also include NIO and XPeng. Earnings promise to be a big deal for the stocks because things have gotten more volatile for EV investors lately.
Li Auto shares (ticker: LI) are down about 16% in February, as of Tuesday’s close, wiping out year-to-date gains and leaving shares down about 6% so far in 2021. NIO shares (NIO) are still up a little year to date, but are off 13% in February. XPeng stock (XPEV) has been hit hardest, falling 21% in February and leaving shares down about 11% year to date.
That’s quite a reversal from recent trends. The three stocks are up an average of roughly 100% over the past six months.
There isn’t anything specific to blame for the recent declines, but many EV stocks have sold off recently. Tesla (TSLA), for instance, is down almost 12% for the month. Rising inflation fears, for the moment, have investors focused on high valuations and not on EV penetration or growth.
EV bulls will welcome earnings news, as long as it’s good news. Analysts expect Li to lose three or four cents a share from about $600 million in sales. The highest analyst estimate for earnings is break-even. A surprise profit would qualify as good news.
Li has a shot at a profit. Deliveries jumped 67% in the fourth quarter, hitting 14,464 vehicles, up from 8,660 vehicles in the third quarter of 2020. Li also reported a small profit, on an adjusted basis, in the third quarter. Shares jumped the week following the earnings report.
Li lost money in the third quarter on an unadjusted or GAAP (short for generally accepted accounting principles) basis. Most companies report adjusted and unadjusted earnings. Stock-based compensation expenses are the big difference between adjusted and GAAP earnings in the case of Li.
Earnings will matter to investors Thursday. So will the outlook. Deliveries in January fell compared with December. Investors will want to know the Chinese EV market remains hot.
After Li, NIO (NIO) reports earnings on March 1. Xpeng (XPEV) follows on March 8.
Analysts expect losses from NIO and XPeng. All three EV makers are still new and growing rapidly. Li delivered about 32,600 vehicles in 2020. Tesla, the EV leader, delivered almost 500,000.
Analysts appear to think good news is coming. They are bullish on Li stock. About 71% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 and Dow Jones Industrial Average is about 55%. What’s more, the average analyst price target is almost $40 a share.
Li shares are down 2%, at $26.46, in recent trading.
Write to Al Root at [email protected]
