Li Auto Down in Pre-Market; Morgan Stanley Remains Bullish
2022.08.10 14:58
Li Auto (LI) Down in Pre-Market; Morgan Stanley Remains Bullish
By Michael Elkins
Li Auto Inc (NASDAQ:LI) is down slightly in pre-market trading Wednesday after Morgan Stanley reiterated an Overweight rating and $53.00 price target on the electric car maker.
An analyst has seen a recent rise in investor concerns over LI’s volume volatility amid the model transition and believes that Morgan Stanley might be able to shed some light on some changes.
The analyst reached out to channels in major cities to compare feedback against collected data to gauge key changes to Li Auto’s latest operations so far in 3Q. These conversations corroborated Morgan Stanley’s view that L9 order intake remains strong; and that Li ONE intake fell in July but didn’t disappear.
Store traffic dropped significantly during April and May due to intermittent citywide lockdowns across China. There was some strong and steady improvement in June (90%+ MoM). The arrival of L9 quadrupled Li Auto’s foot traffic and order intake in July.
Order intake of the Li ONE improved steadily in May and June. However, certain stores saw a 20-30% inflow drop MoM after the L9 became available. The analyst also believes that customer speculation surrounding the possibility of a successive new model launch may have also contributed to the drops at these locations.
He expects L8 to make its debut in 4Q, but the delivery schedule remains uncertain and is subject to supply preparation, L9 sales progress, and Li ONE order inflow. There is some concern that the L8 will potentially cannibalize L9 sales but given the two models have a different value proposition, most stores do not see this as the case.
