Li Auto Stock Skyrockets After Earnings Report - Barron's

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Li Auto stock surged on Friday after reporting earnings.
Courtesy of Li Auto Inc.

Nothing, it seems, can stop Chinese electric-vehicle stocks. Li Auto stock is up 25% in premarket trading, adding to Thursday’s 27% gain.

Better-than-expected earnings by EV peer XPeng (ticker: XPEV) sent Li Auto (LI) shares higher on Thursday. Now, Li’s earnings for its first earnings report as a public company were apparently good enough to propel shares for a second consecutive day.

Li reported a small profit of $16 million renminbi, or $2.4 million, from $370 million in sales. Analysts projected a small loss from $371 million in sales. But the company actually lost a little money: Li’s profit appears when excluding stock-based compensation expenses—a common practice among many companies reporting earnings.

Looking ahead, the company expects to deliver 11,000 to 12,000 vehicles and generate about $475 million in sales for the fourth quarter. Analyst project about $520 million in sales for the fourth quarter, but Li is new and that estimate is only made up of three projections.

Overall, earnings and guidance appear fine, but the strength of the reaction will probably leave traders and investors scratching their heads. Some will say the stocks are approaching bubble territory: Li stock is now up more than 100% over the past month. More bullish investors will point out profits are a positive and that EV demand in China is at a tipping point—meaning sales will rise faster than expected in 2021 and beyond.

Li management hosts an earnings conference call at 8 a.m. to discuss results. Analysts and investors will want to hear more about EV demand in coming quarters and developments regarding new products and features.

In September, Li teamed with NVIDIA (NVDA) and NVIDIA’s Chinese partner, Huizhou Desay SV Automotive to enhance Li’s autonomous driving capability.

While Li surges, S&P 500 and Dow Jones Industrial Average futures are both up about 0.7%.

Shares of Chinese EV peers NIO (NIO) and Xpeng are benefiting from Li’s stock move. NIO shares are up 7% in premarket trading. Xpeng stock is up almost 12%.

Write to Al Root at allen.root@dowjones.com

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