Li Auto Blows a Tire on EPS Miss and Lowered Guidance. Buy Opp?

Chinese electric vehicle (EV) automaker Li Auto Inc. (NASDAQ: LI) reported a surprise top and bottom line miss on its Q1 2024 earnings report. Li Auto is one of the rare Chinese EV makers that are actually profitable. The reason is that Li Auto doesn't yet manufacture all-electric vehicles but rather hybrids, which are both gas and electric-powered.

Li Auto competes in the auto/tires/trucks sector with other Chinese EV makers like BYD Co. Ltd. (OTCMKTS: BYDDF), NIO Inc. (NYSE: NIO) and Xpeng Inc. (NYSE: XPEV) and U.S. EV automaker Tesla Inc. (NASDAQ: TSLA).

Extended-Range Electric Vehicle (EREV)

Li Auto's cars are technically full hybrids since the cars run primarily on electricity, and the gas engine is there to act as a generator to charge the battery when needed. They call them extended-range electric vehicles (EREV). EREVs appeal to a broader audience and solve one of the biggest reasons that EVs haven't gone fully mainstream yet, which is range anxiety. Range anxiety is the fear of running out of power in an EV during a trip and getting stranded.

New 100% China Tariffs on EVs Loom

The Biden Administration will raise its tariffs for various goods imported from China under Section 301 of the Trade Act of 1974. Chinese EVs and EV batteries will see tariffs quadruple to north of 100%. While this sounds like bad news to the Chinese EV makers, they aren't selling many of their EVs in the United States and don't have major plans to do so anyway.

However, according to Reuters, cheap Chinese EVs could come to the United States in the summer. Volvo, owned by Chinese automaker Geely Automobile Ltd. (OTCMKTS: GELYY), could exploit a loophole due to its U.S. manufacturing operations, as its $35,000 EVs could hit dealers as early as the summer of 2024.

Daily Descending Triangle Breakdown Pattern

LI formed a daily descending triangle breakdown pattern. The descending trendline formed at $29.95 on May 6, 2024, capping bounce attempts at lower highs towards the flat bottom lower trendline at $23.04. LI gapped down to 22.72 on its Q1 2024 earnings release and has continued to sell off to a new swing low of $19.38. However, a daily market structure low (MSL) trigger can form a breakout on the rise through $20.63. The daily relative strength index (RSI) is attempting to rise through the oversold 30-band. Pullback support levels are at $19.38, $17.90, $16.25 and $14.59.

Disappointing Results

Li Auto reported Q1 2024 EPS of 17 cents, missing consensus analyst estimates by 3 cents. Revenues surged 36.4% to $3.6 billion. Gross profit rose 38% to $731.9 million. Gross margin improved to 20.6%, up from 20.4% in the year-ago period. Vehicle sales rose 32.3% YOY and fell 39.9% from the prior quarter. Li Auto delivered 80,400 vehicles, up 52.9% YOY. The company has 481 retail stores in 144 cities, 361 service centers, and authorized body shops operating in 210 cities. The company has 410 supercharging stations with 1,770 charging stalls.

Vehicle margin fell to 19.3% YOY compared to 19.8% in the year-ago period and 22.7% in Q4 2023. Losses from operations were $81 million. Operating margin was negative 2.3%. Net income fell 36.7% YOY to $81.9 million. Non-GAAP net income fell 9.7% YOY to 176.8 million.

Downside Guidance

Li Auto gave downside guidance for Q2 2024 revenues of $4.1 billion to $4.3 billion, representing a 9.4% YOY increase. Vehicle deliveries are expected to be between 105,000 and 110,000, representing a 21.3% to 27.1% YOY increase.

Li Auto CEO Xiang Li commented, "During the Labor Day holiday, weekly order growth hits and hit a no all-time high. Particularly, Li L6 received over 41,000 orders within its initial launch sales period from April 18 to May 5. We're sparing no efforts to ensure a robust supply and production ramp-up for Li L6 to drive a rapid increase in deliveries."

Postponing All-Electric SUVs into 2025

Li also commented that it will postpone launching its best all-electric SUVs until the first half of 2025. The main reason for the delay was the inadequate number of charging stations. Li Auto hopes to beef up its EV infrastructure by adding 500 to 600 display spots and over 10,000 charging stations by year's end to supply consistent sales of more than 10,000 units per model.

Li Auto analyst ratings and price targets are on MarketBeat.