The analysts covering Li Auto Inc. (NASDAQ:LI) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
After the downgrade, the 29 analysts covering Li Auto are now predicting revenues of CN¥48b in 2022. If met, this would reflect a huge 32% improvement in sales compared to the last 12 months. Losses are supposed to balloon 173% to CN¥0.99 per share. Yet before this consensus update, the analysts had been forecasting revenues of CN¥53b and losses of CN¥0.64 per share in 2022. So it's pretty clear the analysts have mixed opinions on Li Auto after this update; revenues were downgraded and per-share losses expected to increase.
The consensus price target fell 5.2% to US$43.50, implicitly signalling that lower earnings per share are a leading indicator for Li Auto's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Li Auto, with the most bullish analyst valuing it at US$62.00 and the most bearish at US$28.39 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Li Auto's past performance and to peers in the same industry. We would highlight that Li Auto's revenue growth is expected to slow, with the forecast 73% annualised growth rate until the end of 2022 being well below the historical 94% p.a. growth over the last three years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 22% per year. So it's pretty clear that, while Li Auto's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Li Auto. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Li Auto going out to 2024, and you can see them free on our platform here.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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