Three months ago, Chinese electric-vehicle (EV) company Li Auto (LI +5.12%) announced powerful fourth-quarter earnings, but with a caveat: Management warned that a sales slump was coming in the 2024 first quarter.
Now it's time for that first-quarter report, and the news is not good. Earnings came in at just $0.17 per share, half of what Wall Street expected. Quarterly sales of $3.55 billion similarly missed consensus targets of $3.7 billion.
So Li Auto stock tumbled on Monday and was down 14.3% through 10:45 a.m. ET.
NASDAQ: LI
Key Data Points
Li Auto's first quarter
Not all the news was bad. Li delivered 80,400 EVs in the quarter, up 53% from a year ago, and revenue climbed 36%. Problem is, that number is a 39% decline from last quarter and the fewest electric cars it has delivered since the year-ago period.
What's more, the 36% better revenue is less than the 53% better unit sales, so Li isn't benefiting as much from greater manufacturing scale as investors had hoped. Gross profit margins inched up by just 20 percentage points, and with operating costs up 71%, the company booked a loss for the quarter.
So Li's $0.17 per-share profit was only an adjusted number. According to generally accepted accounting principles (GAAP), the company lost $0.08 per share.
Is Li Auto stock a sell?
That's the opposite of what growth investors want to hear, and so they're selling the stock today. Is that the right call?
Not necessarily. Li did lose money in first quarter. It also burned $700 million in cash, and trailing free cash flow has shrunk from $6.2 billion a year ago to just $4.5 billion today.
But at the same time, the stock price has been cut in half already from where it sat three months ago. Today, Li's $21.2 billion market capitalization means this stock costs only 4.7 times trailing free cash flow.
With vehicle deliveries predicted to rise at least 21% in the second quarter to more than 105,000 units, that's a small price to pay for what remains a great growth EV stock.
