Li Auto (NasdaqGS:LI) Valuation Check as Analyst Downgrades Follow EV Sector Challenges

If you have been watching Li Auto (NasdaqGS:LI), you have probably noticed the recent flurry of headlines as top investment banks issued multiple stock downgrades. These moves are getting attention not just because so many major firms acted in quick succession, but also because of the consistent thread running through their concerns: the Chinese EV sector is facing tougher headwinds. As the country's passenger vehicle market shows signs of slowing and government subsidies come to an end, analysts are questioning whether Li Auto can maintain its growth trajectory, especially as it pushes deeper into the more competitive BEV segment where margins are slimmer.

Unsurprisingly, these cautious calls have weighed on market sentiment. Li Auto’s stock has given back much of its earlier gains, with a decline of over 20% in the past month and roughly 17% over the past three months. This comes despite a steadier long-term story, including a 13% increase over the year and solid five-year returns. While Li Auto has moved forward with new product launches and impressive revenue growth, recent price momentum appears to be fading due to heightened risk perception and shifting market dynamics.

After this series of downgrades and a cooling share price, is the market now overlooking Li Auto’s long-term value, or is every risk already reflected in the current price?

Most Popular Narrative: 28% Undervalued

According to community narrative, Li Auto is considered significantly undervalued. Current market pessimism may overlook long-term catalysts rooted in technology and expansion plans.

Li Auto's investment in autonomous driving technology, specifically their dual-system approach combining end-to-end models with vision language models and the rollout of their AD Max V13, positions the company for continued innovation and improved product offerings. This could potentially increase future revenue through enhanced customer experience and advanced driving features.

What is the real growth engine behind this bullish price target? This narrative points to strategic advancements in electrification, AI, and product launches that could support the company's continued development. Want to explore which projections and future profit multiples are influencing this fair value estimate? Keep reading for more details behind the current buzz.

Result: Fair Value of $33.57 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, falling average selling prices or intensifying competition in the NEV market could limit Li Auto’s ability to deliver the expected growth.

Find out about the key risks to this Li Auto narrative.

Another View: A Look Through Our DCF Model

While analyst forecasts point to strong long-term growth, our DCF model offers a more conservative lens. It suggests the stock still trades below its estimated fair value. However, does this model fully reflect market headwinds?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Li Auto for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Li Auto Narrative

If you have your own perspective or prefer to dive into the numbers yourself, shaping your own Li Auto story can take just a few minutes. do it your way.

A great starting point for your Li Auto research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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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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