Tuesday, 23 April 2024

Why Li Auto Stock Is Tumbling Today

by BD Banks

Extending a slide that saw shares of Li Auto (NASDAQ: LI) plunge more than 10% last week, the electric car stock is driving lower today as investors wrestle with news that the company is slashing prices on its vehicles as well as news that an analyst has lowered the price target of Li Auto’s stock.

As of 11:55 a.m. ET, shares of Li Auto have fallen 5.8%, recovering slightly from their earlier decline of 8.6%.

Price cuts are only one factor powering the sell-off today

Li Auto is lowering the price tags on five electric vehicle (EV) models as it tries to remain competitive with its EV peers in China. According to Reuters, Li Auto is cutting prices between approximately $2,500 and $4,100 on its Li L7, Li L8, Li L9, and Li MEGA models. Customers who had bought these vehicles earlier in 2024 will receive refunds. The company’s decision to lower prices comes amid actions from EV manufacturers Tesla and BYD, which have also lowered the price tags on their vehicles recently.

Another source of Li Auto investors’ discontent today is coming from Citigroup. While Citigroup maintains a buy rating on Li Auto stock, it sees less upside, slashing its price target to $43.60 from $48.50. In addition to questions about the company’s L6 orders, Citigroup thinks that Tesla’s price cutting initiative will continue to impact EV peers, according to TheFly.

Is now a good time to steer clear of Li Auto stock?

Between the price war that Li Auto seems to be embroiled in right now and Citigroup’s lower price target, it’s unsurprising that the stock is plummeting today. For those interested in hitching a ride with Li Auto stock, it may be wise to wait for some stability in the marketplace and to see how the price cuts affect the company’s financials. Fortunately, there are plenty of other EV stocks for investors to consider in the meantime.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD and Tesla. The Motley Fool has a disclosure policy.