The NIO ET7, the flagship sedan for the Chinese electric-vehicle maker.
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Of the three hot Chinese electric-vehicle stocks, Jefferies has a favorite—and it isn’t one investors might expect.
Hong Kong-based analyst Alexious Lee launched coverage of Li Auto (ticker: LI), XPeng (XPEV), and NIO (NIO) on Monday. He recommends buying Li Auto stock but is a little more cautious about NIO and XPeng, rating both stocks Hold.
Li has recently taken a back seat to XPeng and NIO. The latter two have made more dramatic splashes with big consumer events and autonomous-driving launches. Over the past three months, NIO and XPeng stocks are up 110% and 161%, respectively. Li shares are up 61%.
Jefferies analyst Lee sees that as an opportunity. His price target for Li stock is $44.50. Shares were recently trading for $33.94. Li has one model for sale—an SUV with an onboard generator to recharge batteries on the fly.
The Li ONE SUV isn’t a hybrid in the traditional sense. The gasoline-powered generator doesn’t drive the wheels like a traditional engine. It’s only there to extend EV range. Lee believes the company’s powertrain choice has been a success and will help Li become profitable sooner than NIO and XPeng. XPeng and NIO are expected to lose money in 2021, based on consensus earnings estimates. Li Auto is expected to break even.
Lee has good things to say about NIO and XPeng too. He believes NIO has a leading luxury EV brand, but his $60 NIO price target is close to where shares have traded recently. Lee is impressed with XPeng’s self-driving technology, but his $54.40 price target for shares implies less upside than his Li Auto price target. XPeng shares were recently trading at $52.
Lee’s thinking appears to align closely with analyst peers. Chinese EV stocks, overall, are well regarded on Wall Street. With the new Buy rating on Li shares, 75% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 57%. With Lee’s new Hold ratings from Jefferies, about 57% and 67% of analysts rate NIO and XPeng Buy, respectively.
NIO stock trades for about 18 times estimated 2021 sales. XPeng trades for about 17 times that metric. Li is the least expensive of the three, trading for about 8.4 times estimated 2021 sales.
Tesla (TSLA), the world’s most valuable car company, trades for almost 17 times estimated 2021 sales.
Barron’s recently wrote cautiously about the three U.S.-listed Chinese auto stocks. Valuation is the main reason. But more competition is coming to the Chinese EV market as Tesla and others launch more battery electric cars in coming months. Since that article appeared in mid-December, Li stock is up about 9% and XPeng shares have gained about 17%. NIO shares, however, are up 40%. The S&P 500 and Dow Jones Industrial Average, for comparison, are both up about 4% and 3%, respectively, over the same span.
It’s been a bad idea to bet against EV stocks lately. Stock in Tesla, the world’s most valuable car company, has gained about 39% over the same span.
Over the past year NIO and Tesla shares have gained about 1,150% and 730%, respectively. XPeng and Li both went public this past summer. They don’t have one-year trading histories yet, but both stocks have been strong since their IPOs. Li Auto made its debut at $11.50. XPeng priced its IPO at $15 a share.
Write to Al Root at [email protected]
