Why Li Auto Stock Braked Today

Chinese electric car company Rioto (lee -3.38%) We’re ending a strong week on a weak note on Friday. Li shares are up 33% from last Friday’s close after reporting strong fourth-quarter results on Monday. But the stock picked up some pace today, falling 3.5% by 10:30 a.m. ET after reporting February delivery figures.

But this was expected.

What Li Auto will do in 2023

Lee’s performance in 2023 was truly fantastic. Its revenue increased 173.5% year over year to $17.4 billion. Gross profit margin expanded by 280 basis points to 22.2%. This is double our previous profit margin. general motors or ford. Free cash flow increased 19-fold to $6.2 billion. And net income reversed from a loss in 2022 to a profit in 2023 of $1.7 billion.

With a market capitalization of $45 billion, Li Auto stock seemed like a pretty solid buy at 27 times earnings, but its growth rate was in the triple digits. Nonetheless, Li ended his 2023 earnings report with a warning for 2024.

From some perspective, things will continue to go well for Li, with management predicting revenue growth of more than 90% in the first quarter of 2024 compared to the first quarter of 2023. But from another perspective, Li seemed to have to do the following: Brakes: Compared to the fantastic numbers Li reported for the fourth quarter of 2023, the first quarter of 2024 will look somewhat less optimistic, with car deliveries down at least 22% sequentially and sales down about 24%.

What awaits Li Auto in 2024?

Today’s news confirms these warnings and also suggests that the situation may be worse than Li thought earlier this week. Li just announced that it only delivered 20,251 EVs in the month of February. This was a 35% decline in deliveries compared to January 2024 and was worse than the decline expected for the entire first quarter. It also just 22% increase year-on-year compared to February 2023. This is not the 90% growth Li promised just a week ago.

So what does this mean for Li stock long-term? Maybe it’s nothing. The last thing we want to do is overreact to a single data point in one month when investing long-term. But we also don’t want to ignore evidence that contradicts why we’re investing in the first place.

For Li, the thesis is that the company is already making a lot of money and growing very strongly (if not as strongly as last year). According to a February report, Li’s growth rush may end sooner than expected and slow down even faster.

Investors beware.