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Li Auto (LI) Warming Up to Q2 Earnings: What Can Investors Expect?

Stiff competition in the Chinese EV market, along with soaring R&D and SG&A expenses, is likely to have adversely impacted Li Auto's (LI) Q2 performan...

This story originally appeared on Zacks

Li Auto Inc. LI is slated to release second-quarter 2021 results on Aug 30, before market open. This Beijing-based company made its NASDAQ debut on Jul 30, 2020, being the second China-based electric vehicle (EV) maker to be listed on the U.S. stock market after NIO Inc. NIO. The Zacks Consensus Estimate for the quarter’s loss is pegged at 3 cents per share.

In the last reported quarter, the company posted net loss per share of 6 cents, narrower than the Zacks Consensus Estimate of a loss of 7 cents.

The Zacks Consensus Estimate for Li Auto’s second-quarter loss per share has widened by one cent in the past 90 days.

- Zacks

Earnings Whispers

Our proven model does not predict an earnings beat for Li Auto for the to-be-reported quarter, as it does not has the right combination of the two key ingredients. A combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Li Auto has an Earnings ESP of 0.00%.

Zacks Rank: It carries a Zacks Rank of 4 (Sell), currently.

Factors at Play

Li Auto is an innovator in China’s new energy vehicle market. The company designs, develops, manufactures, and sells premium smart EVs. The company currently sells a family-sized SUV named the Li One. The company started volume production of Li One in November 2019 and released the 2021 Li One in May 2021.

Backed by China's food delivery giant Meituan, Li Auto is witnessing surging demand, steered by the launch of its upgraded version of the Li One SUV. Li Auto also beat the upper end of its second-quarter guidance of 15,500 vehicles, delivering a total of 17,575 vehicles over the quarter. The delivery count also marked an increase of 166.1%, year over year, and 39.7%, quarter over quarter. This is likely to have aided the company’s second-quarter performance.

However, amid the soaring popularity of green vehicles, Li Auto has rolled out only one model to the market, as of now. Also, competition in the Chinese electric vehicle market is getting intense. Li Auto is not only competing with peer Chinese EV players like NIO and XPeng XPEV but also faces stiff competition from established players like Tesla TSLA. Further, XPeng and NIO have both started shipping China-made EVs to Norway, in order to expand their business internationally. Li Auto is yet to outgrow China's EV market. These factors are likely to have negatively impacted the company’s quarterly performance.

The company’s elevated research and development (R&D) expenses on advanced technologies for the development of next vehicle models is expected to have dented its second-quarter margins. Also, Li Auto’s soaring selling, general and administrative (SG&A) expenses resulting from the increased marketing and promotional activities, and elevated headcount and rental expenses with the expansion of the company’s sales network might have further eroded its bottom line during the quarter under review.

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