Macquarie cuts Li Auto stock rating, lowers price target to $27

On Sunday, Macquarie analysts adjusted their outlook on Li Auto stock (NASDAQ:LI), downgrading the company’s rating from Outperform to Neutral. Accompanying this change, the price target was also revised, moving from $29.00 to a new target of $27.00. The revision comes amid concerns regarding the company’s ability to maintain its growth trajectory, despite the company’s GREAT financial health score according to InvestingPro data. Currently trading at $27.46, analyst targets range from $19.62 to $40.25, reflecting mixed market sentiment.

The downgrade reflects apprehensions about Li Auto’s potential to sustain future growth beyond its current profitable niche in premium Extended Range Electric Vehicles (EREVs). The analysts pointed out that unless Li Auto announces a broader array of new models beyond the planned Battery Electric Vehicle (BEV)/EREV Sport Utility Vehicles (SUVs), it may be challenging for investors to justify a higher valuation for the stock. According to InvestingPro analysis, Li Auto shows strong fundamentals with a 20.5% gross profit margin and healthy revenue growth of 16.6% over the last twelve months.

The analysts specifically mentioned that the company’s future hinges significantly on the successful launch of its upcoming models, the i8 and i6. The market’s reception to these new releases will be a critical factor in determining Li Auto’s performance.

Macquarie’s revised price target of $27.00 represents a modest decrease from the prior target but indicates a level of caution from the firm regarding the growth prospects of Li Auto in a highly competitive electric vehicle market.

Investors will be closely monitoring Li Auto’s progress, especially the launch and market performance of the i8/i6 models, to gauge the company’s capacity to expand its product lineup and capture additional market share in the evolving automotive industry.

In other recent news, Li Auto reported its fourth-quarter earnings, surpassing analyst estimates with adjusted earnings of 3.79 yuan per American depositary share, compared to the consensus estimate of 3.48 yuan. Revenue for the quarter rose by 6.1% year-over-year to 44.27 billion yuan ($6.1 billion), slightly above expectations. However, the company’s first-quarter revenue guidance disappointed, forecasting between 23.4 billion yuan and 24.7 billion yuan, which represents a year-over-year decrease and falls short of analyst expectations. Vehicle deliveries in the fourth quarter reached 158,696 units, up 20% from the previous year but below estimates. For the first quarter of 2025, Li Auto anticipates deliveries between 88,000 and 93,000 vehicles, marking a year-over-year increase.

Nomura recently downgraded Li Auto’s stock rating from Buy to Neutral, while raising the price target to $31. This reflects a cautious outlook amid uncertainties surrounding near-term shipments and upcoming vehicle launches. Despite these concerns, Nomura projects a 21% revenue compound annual growth rate and a 23% earnings CAGR for Li Auto from 2024 to 2027. The analysts foresee significant growth opportunities in 2026, following the release of new models in the latter half of 2025. Li Auto’s gross margin contracted to 20.3% from 23.5% a year earlier, and free cash flow declined 59% year-over-year to 6.06 billion yuan. For the full year 2024, the company reported total revenues of 144.5 billion yuan, up 16.6% year-over-year, with net income of 8.0 billion yuan, down 31.9% from 2023.

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