Investors have an attractive entry point for Li Auto after a recent sell-off, said Deutsche Bank. Analyst Edison Yu upgraded U.S.-listed shares of the Chinese electric vehicle maker to buy from hold, while also decreasing his price target by $4 to $41. His new target implies shares can surge 46.4% over the next year from Monday’s closing level. The stock has declined approximately 28% since late November. That performance is worse than that of the KraneShares CSI China Internet ETF (KWEB) , which lost around 14% in the same time period. LI KWEB 3M mountain Li Auto vs. the ETF, 3-months This underperformance comes despite Li having a “best-in-class” management team, the analyst said. Li also has track record of beating ambitious targets for volume and cost, he added. Yu noted that the first quarter should show some weakness. But he said new models and improvements to existing vehicles should help volume and margins recover starting in the second quarter. Following the decline, Yu said there’s “a compelling set-up in the coming quarters driven by a robust product pipeline, further supported by an attractive valuation for a top tier EV player.” Li’s slide also comes as investors have grown wary of companies with large presences in China amid concerns about the state of the consumer. Chinese stocks have also been under pressure broadly. The Shanghai Composite is down more than 6% year to date — even after a 3.2% rally Tuesday that snapped a six-day losing streak. Yu noted he used a lower multiple for Li Auto given the broader de-rating across Chinese ADR shares and global electric vehicle makers. Indeed, Yu’s still considered relatively conservative on the Street. While also having a buy rating, the average analyst has a price target reflecting a whopping upside of nearly 83%, according to FactSet. Li shares popped more than 6% in early trading Tuesday. The stock has dived nearly 20% thus far in the new li year, relinquishing some gains after advancing 83.5% in 2023.
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