An update from Li Auto Inc (NASDAQ:LI) seems to have given investors the impression that they have received some positive news, which is precisely what the shares of Chinese electric vehicle manufacturers need. Despite the fact that the automaker reduced its forecast for the number of deliveries during this quarter, the stock’s value increased as a result of trading in foreign countries. Despite the fact that the automaker reduced its forecast for the number of deliveries in this quarter, this occurred.
Li Auto Inc Announcement
On Monday, Li Auto Inc announced that the company anticipates shipping around 25,500 vehicles during the third quarter. When the firm released its second numbers, the company anticipated that it would sell between 28,000 and 29,000 automobiles, so the revised call is short by 2,500 units compared to that range.
During premarket trading on Monday, the price of Li stock in Hong Kong increased by 4.2%, while the price of its American depositary receipts traded in the United States decreased by 2.6%. The S&P 500 index (SPX -1.03%) and the Dow Jones industrial average (DJIA -1.11%) finished with 0.9% and 0.8% losses, respectively. The S&P 500 index returned 1.03% in the negative.
The emotions couldn’t be more different, yet the volume of trade in the U.S. premarket is very low compared to trading during regular hours. Because there were roughly 20 times as many transactions of Li Auto shares in Hong Kong on Monday as there were during the premarket in New York, the price movement in Hong Kong is a more vital sign of how investors are reacting to the news for the time being.
When a company reduces its earnings projections, it is not typical for the stock price to go up. In addition to this, according to Bloomberg, Wall Street was looking for approximately 29,000 units, which included approximately 25,000 Li Auto ONE SUVs and 4,000 Li Auto Inc L9s, which are both models produced by the firm. This indicates that the revised projection also constitutes a miss in comparison to the expectations of the analysts.
However, there are three reasons investors, at least in Hong Kong, would buy. These arguments explain why investors might be buying. To begin, the deficiency might be attributed to a problem plaguing the whole automotive industry: difficulties in obtaining parts. According to the press release, “The revision is a direct consequence of the supply chain restriction, while the underlying demand for the Company’s cars remains healthy.” “The Company will continue to closely cooperate with the partners in its supply chain in order to address the bottleneck and speed up production.”
The updated projection indicates that Li Auto Inc will deliver approximately 10,500 vehicles in September, which is a significant decrease from the total of 14,993 vehicles delivered in July and August combined. Any given month in which Li Auto Inc sells more than 10,000 copies is considered to be a successful one for the company.
The beginning price of a stock is also essential. The stalling of deliveries and rising interest rates have contributed to a 17% decrease in the price of Li stock over the past month. It’s possible that the pricing has already reflected all of the negative news regarding the industry.
Featured Image: DepositPhotos © Piyaphunjun
Author Valerie Remorosa