To The Moon

$Li Auto(LI)$ is expected to release its quarterly earnings result for Q4 2024 on 14 March 2025 before the market open.

Li Auto is expected to see a rise of 3.7% in its quarterly revenue to 43.26 billion yuan, this is inline with the guidance for revenue that was given to be between 43.2 billion yuan and 45.9 billion yuan.

Li Auto delivered 158,696 vehicles for the quarter, missing its guided range of 160,000 units to 170,000 units.

Earnings per share consensus estimate for Q4 2024 is expected to come in at 40 cents which is 31% lower than the same period last year.

Li Auto (LI) Last Positive Earnings Call Gave Investors Only 1.90% Gain Since

LI had a positive earnings call on 31 October 2024 and the share price have only gained 1.90% since.

The earnings call reflects a strong performance by Li Auto in Q3, with record vehicle deliveries and financial results. Significant advancements in autonomous driving and network expansion contribute positively, though there are challenges with cost management and pricing strategies. The conservative guidance for Q4 indicates caution amidst competitive pressures.

Li Auto (LI) Guidance On Growth Strategy

During the Li Auto Q3 2024 earnings call, the company provided guidance for Q4 vehicle deliveries, expecting between 160,000 to 170,000 units, reflecting a year-over-year increase of 21.4% to 29%. For the full year, deliveries are projected to be between 502,000 and 512,000 units. Total revenues for the fourth quarter are anticipated to range from RMB 43.2 billion to RMB 45.9 billion, indicating a year-over-year increase of 3.5% to 10%. The guidance reflects the company's strategic focus on expanding its market share, particularly in the NEV segment priced above RMB 200,000. Additionally, Li Auto plans to expand its supercharging network to over 2,000 stations by the launch of its BEV models, scaling to 4,000 by the end of 2025, to support its long-term growth strategy.

Key Factors That Might Influence Li Auto (LI) Q4 2024 Earnings

Market Position and Competition

Li Auto operates in China’s competitive EV market, competing with BYD, NIO, XPeng, and Tesla. Its focus on premium extended-range EVs (EREVs) targeting families may offer pricing power, but intense competition and price wars could pressure margins.

Li Auto reached 1 million cumulative vehicle deliveries in just 58 months, the first among emerging NEV brands in China.

Growth and Deliveries

Consistent delivery growth (e.g., surpassing 100,000 vehicles in Q3 2023) suggests strong execution. New model launches in 2024 (e.g., expanded SUV lineup) could boost Q4 sales, especially with seasonal/year-end promotions. Li Auto delivered over 152,000 vehicles in Q3, up 45.4% year-over-year, driving segment market share to 17.3% from 14.4% in Q2.

Margins and Profitability

Gross margins (~22% in recent quarters) reflect cost management. Continued scale, supply chain stability (e.g., battery costs, chip availability), and premium pricing will be critical to offset potential price competition.

Total revenues reached a record high of RMB 42.9 billion, up 23.6% year-over-year. Gross margin expanded to 21.5%, and non-GAAP income from operations hit an all-time high of RMB 4.4 billion.

R&D expenses decreased by 8.2% year-over-year and 14.6% quarter-over-quarter due to decreased costs for new products and technologies. Vehicle margin relatively stable but slightly decreased due to lower average selling prices and different product mix.

Economic and Regulatory Environment

China’s economic recovery and consumer demand will impact sales. Government EV policies (subsidies, infrastructure) and regulatory changes (safety, emissions) could affect costs and demand.

Rapid advancements in autonomous driving, with significant improvements in user experience and competitive technology.

Strategic Initiatives

Expansion into new segments, technology advancements (e.g., autonomous driving), and potential international markets may drive growth. R&D investments could enhance long-term competitiveness.

479 retail stores and 436 service centers in China, with plans to expand charging stations to over 2,000 by next year. Received MSCI's highest AAA ESG rating for the second consecutive year.

Q4 vehicle deliveries expected to be between 160,000 and 170,000 units, indicating a conservative growth outlook compared to previous quarters.

Li Auto (LI) Price Target

Based on 6 Wall Street analysts offering 12 month price targets for Li Auto in the last 3 months. The average price target is $33.02 with a high forecast of $40.00 and a low forecast of $29.00. The average price target represents a 11.07% change from the last price of $29.73.

We might need to consider the following risks for how the share price movement before and after the upcoming Q4 2024 earnings would be like:

Geopolitical tensions, supply chain disruptions, or quality issues could harm performance. Weaker-than-expected economic recovery or shifts in consumer preferences toward pure EVs might also pose challenges.

These factors could derail the share price even when LI could produce a better-than-expected earnings result or a positive guidance.

Technical Analysis - Exponential Moving Average (EMA)

If we looked at how Li Auto has defied the selloff over the past few days, it looks like the bulls have successfully create a daily uptrend, and now attempting to make a daily uptrend expansion.

But we need to be aware that China economy is still facing consumer spending slowness, but RSI is forming a potential crossover which might signal a bullish reversal, so I will be watching today (13 Mar) trading to see if there is any increase in buying demand, this might help to propel LI into a nice gap up after its earnings.

These are the factors that make a bull or bear case.

Bull Case: Continued delivery growth, margin stability, and successful new models could lead to strong Q4 revenue and profitability, exceeding analyst expectations.

Bear Case: Price wars, economic slowdown, or operational missteps might result in margin compression and missed targets.

Summary

If Li Auto maintains its execution track record, navigates competitive pressures, and benefits from favorable market conditions, Q4 2024 earnings could reflect robust growth.

We also need to monitor the overall market trend, as US equities are facing selloff, it might have smoothened on Wednesday (12 Mar) but I think the risks of further selloff still present.

Appreciate if you could share your thoughts in the comment section whether you think Li Auto could show its market share expanding and also a more sustainable growth can be desired.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.