The vast majority of my investments are held within my Stocks and Shares ISA. It’s an incredible vehicle for our investments and any UK resident can take advantage of its benefits — it shields our capital gains and dividends from tax.
Like any investor, I always want the best investment opportunities for my ISA. And one company I’ve been following very closely is Li Auto (NASDAQ:LI).
The new energy vehicle (NEV) stock, which still holds so much promise, has slumped in recent months amid an industry slowdown.
But I see this as a buying opportunity. It’s a diamond in the rough.
Analysts are bullish
As I often mention, if we’re trying to establish how much a company should be worth, it can pay us to start by looking at the average share price target. This is the consensus of Wall Street and City analysts covering the stock. Sometimes they get it wrong, but it’s a great starting point.
Li Auto is perhaps the most undervalued stock I’ve come across, according to its share price targets. In fact, the current share price of $26.4 is 84% below the average target. That’s really interesting.
The stock currently has 19 ‘buy’ ratings, five ‘outperform’ ratings, and two ‘hold’ ratings. Morgan Stanley has a target of $65 on the stock. That would represent a massive premium versus the current position.
A tough few months
Li Auto stock surged to around $46 a share in late February, but it came crashing down shortly after. The reason for this was its vehicle delivery figures.
The company, like its peers, reports how many vehicles it delivers each month. This can add to volatility as it’s reporting new data more frequently than most companies.
In February, Li reported that it had delivered 20,251 vehicles. That was up 21.8% over last year, but down from 31,165 in January and 50,353 in December. Deliveries picked up a little in March and April, but it’s still been a slow start to the year.
The Chinese firm had hoped to deliver 800,000 vehicles in 2024, but it now expects to sell between 560,000 and 640,000.
It’s not a sprint
Li Auto hasn’t given too much in the way of an explanation for the poor start to the year, but other companies are in the same driving seat.
However, it seems like its first battery electric vehicle (BEV) has been something of a letdown.
The Li Mega might be crammed full of tech and can be fully charged in just 12 minutes, but it’s not an attractive car. Social media’s been keen to point this out, with the company’s CEO condemning those who said it looks like a hearse.
Nonetheless, this is just one model. I certainly believe the company will come back stronger, and it has a host of new releases this year. There’s one big thing in Li Auto’s favour as well. It’s already profit-making, and most of its peers, with the exception of Tesla, aren’t.
Moreover, it’s not expensive considering its commanding position within a growing market. Li Auto’s currently trading at just 14.3 times forward earnings.
The slowdown’s a concern, but it’s a marathon, not a sprint. I’m confident Li will deliver for investors.
