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Li (ticker: LI) sold shares in an initial public offering priced at $11.50 on July 29. Shares have settled in about 30% higher, valuing the company’s stock at about $12.5 billion.
That isn’t high enough, according to both brokers issuing initial recommendations. Goldman analyst Fei Fang set his price target at $20.60 a share. Bernstein’s Robin Zhu values Li stock at $21 a share.
Fang’s price target is a hair-lower, but he put Li stock on Goldman’s “conviction buy” list, reserved for the firms’ best ideas. “Li Auto is differentiating itself from the broader Chinese auto-making industry by envisioning and creating compelling EV consumer experiences—and showing a willingness to take on the risk of
Li’s SUV includes a gasoline-powered generator that recharges batteries on the fly, serving as a range extender for the vehicle. An onboard generator is an advantage for Li because China’s EV charging infrastructure isn’t well developed.
Fang expects the company to introduce more extended-range electric vehicles—including sedans—over the next few years. In his financial model, he has Li sales rising from 30,000 vehicles in 2020 to 445,000 vehicles in 2025.
Right now, Li is a little smaller in delivery volume than NIO (NIO), another Chinese EV maker. NIO stock, for comparison, is worth almost $17 billion. The company also has a little more debt than Li.
Fang also covers NIO stock. He rates it Sell with a $7.70 price target, implying NIO should be worth about 60% of what Li is worth. The difference in valuation is one way to illustrate how high Fang is on Li’s business strategy.
Zhu covers NIO stock, too, and rates shares the equivalent of Hold. His price target is $12 a share.
Looking ahead, investors should expect more Li research reports in coming weeks. The company has only two analysts from large brokerages covering it, compared with NIO’s 14. Analysts are often prohibited from publishing research immediately following an IPO. Goldman bankers, for their part, helped Li raised money in its stock offering.
Li shares were up 10% at 1:26 p.m. on Monday. The Dow Jones Industrial Average was up 258.19 points, or 0.9%, while the S&P 500 was up 0.7%.
Li has a short trading history, but EV stocks in general are on fire this year. The stocks Barron’s tracks are up roughly 250% year to date. Stock in Tesla (TSLA), the world’s most valuable car company, is up about 390% year to date. NIO shares have gained about 250%.