LI Stock is Worth a Test Drive on This Encouraging Sign

Stocks to buy

Li Auto (NASDAQ:LI) might not be China’s biggest or best-known electric vehicle (EV) manufacturer. However, it’s among the most ambitious ones, with a lineup of sleek, economical and fast-charging cars. On the other hand, China’s EV market is facing a number of issues that might dissuade prospective investors from buying LI stock.

Still, with Li Auto accelerating its timeline for a new SUV launch, there may be valid reasons to anticipate a near-term turnaround.

Sometimes, it’s okay to take a chance on a risky stock. The idea is to get in when conditions are challenging and the sentiment on Wall Street is at a low point. Additionally, it’s important to maintain a small position size if you’re going to use this type of strategy.

Given the challenges facing China’s EV market now, LI stock fits into the category of high-risk, high-reward stocks. Our “B” rating is appropriate, therefore, as this type of investment isn’t for everyone. But if you’re willing to embrace the volatility, you just might end up with a huge winner.

LI Li Auto $23.05

What’s Happening with LI Stock?

Speaking of volatility, Li Auto’s shareholders have had to tolerate big up-and-down moves throughout 2022. The stock looks cheap now, though, as it came down from $40 in June to exactly $25 on Sept. 23.

Why is LI stock on sale now? Is it because the company is failing as a business venture? Not really, as the Chinese EV market as a whole has come under tremendous pressure lately. Just as a rising tide lifts all boats, a sinking tide will bring all of the ships down, including some perfectly viable businesses.

It’s likely that traders have dumped their Li Auto shares due to a number of non-company-specific issues. These include a weakening yuan, the faltering Chinese real-estate market, continuing Covid-19 lockdowns in China and ongoing tensions between the U.S. and Chinese governments/regulators.

Certainly, prospective LI stock investors shouldn’t simply ignore these challenges. At the same time, risk-tolerant traders should consider the upside potential of strong-conviction stocks if and when China’s economy recovers.

Li Auto’s Early SUV Launch Is Encouraging

Cautious investors might need confirmation, or at least a sign, that China’s economy and EV market will recover soon. There are no guarantees about this, of course. Yet, it’s encouraging to know that Li Auto plans to introduce its Li L8 SUV model earlier than previously expected.

To view the bigger picture here, we have to rewind the clock to Aug. 15. That’s when Li Auto disclosed its second-quarter 2022 results. The company delivered 28,687 vehicles during the quarter, up 63.2% year-over-year.

Already, it’s starting to sound like Li Auto is faring well despite the aforementioned macro-level challenges. Now, let’s fast-forward to Sept. 1., when Li Auto released its August 2022 delivery update. The automaker delivered 4,571 vehicles in August, but that’s not the most important detail of this story.

Rather, we should focus on Li Auto co-founder and President Yanan Shen’s announcement and description of a soon-to-launch SUV model:

“Meanwhile, we are preparing for the launch of Li L8 in early November, with delivery beginning in the same month. Li L8 is a large premium smart SUV for families. The model will be available in two variants, a six-seater and a VIP five-seater, to broadly cater to diverse family groups.”

As it turned out, however, Li Auto’s investors and customers won’t have to wait for “early November.” In a fresh press release, the company proudly announced that the Li L8 SUV will be introduced to the public on Sept. 30, “ahead of schedule.”

Even more heartening than the accelerated release timeline is Shen’s stated reason for it. The earlier-than-anticipated SUV launch is based on the “overwhelming market response in anticipation of its release,” Shen revealed.

What You Can Do Now

Clearly, Shen is confident in the Li L8 SUV’s sales prospects. This family-focused EV model could threaten Li Auto’s competitors and provide a powerful revenue stream.

That said, you’ll still want to keep an eye on China’s EV market conditions, and the country’s economy as a whole. So, for a smart-vehicle investment with an intriguing risk-to-reward profile, feel free to consider a small allocation in LI stock.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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