Updated: 3 days ago
Well it's been an amazing bull run for electric-vehicle stocks, as a new generation of start-ups has joined Tesla in capturing the imagination of investors. NIO has led the way, with its shares up more than 1,000% is a year, as investors bet on disruption as the automotive industry goes electric.
NIO is an exciting company, but it's fair to say a lot of that enthusiasm is already priced into the shares. NIO currently trade at about 20 times expected sales over the next 12 months.
Given that valuation, it might be best to focus attention on other options right now. Here's why we think Li Auto (NASDAQ:LI), is a much better pick today.
Li Auto are attempting to carve out a profitable niche in the Chinese auto market. Early indications are it is succeeding.
Li Auto makes premium electric SUVs, with one vehicle on the road right now. That vehicle, the Li One, is selling well, and the company has four other SUV models it plans to add to its portfolio in the years to come.
Li is focused on what it says is the fastest growing segment of the automotive market, and is attempting to differentiate itself via features including an onboard gasoline generator that supplements the battery and acts as a range extender. That can be an important selling point in China, where EV sales are booming but charging infrastructure, especially outside of large urban areas, is lagging behind sales growth.
The company also has a management team that is familiar with the workings of U.S. public markets. Li's founder and CEO, Li Xiang, brought his last start-up to Wall Street, and as owner of 21% of Li Auto's shares his interests are closely aligned to those of shareholders.
Like NIO, Li Auto is not an inexpensive stock. The company trades today at about 14 times the amount of revenue it expects to generate over the next 12 months. But Li Auto has the potential to grow into that valuation quickly.
Li Auto expects to sell about 30,000 vehicles this year, but Goldman Sachs analyst Fei Fang says it has the infrastructure in place to manufacture up to about 500,000 annually without much added construction cost. The analyst expects the company to reach this by 2021.
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