Rocketing to a price of $25.68 during today's morning trading session, shares of Li Auto are still -14.11% below their average target price of $29.9. Could there be more upside potential for the stock? Analysts are giving LI an average rating of buy and target prices ranging from $21.470087 to $38.798607 dollars per share.
The market seems to share this rosy outlook, since Li Auto has a short interest of only 4.8%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to tell how the market is perceiving a stock is to look to its rate of institutional ownership. With their vast resources, hedge funds, pension funds, and wealth managers are able to perform due diligence to a level that most investors cannot. So it follows that their investment decisions may be more educated. But we also know that bankers and portfolio managers can make mistakes too.
So the fact that Li Auto has a low rate of institutional ownership at 9.6% is not an immediate red flag. It just means that something about the company has kept institutional investors from committing -- or the stock is simply flying under their radar.
In conclusion, we see mixed market sentiment regarding Li Auto because of an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and a very small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about LI:
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The stock has trailing 12 month earnings per share (EPS) of $1.32
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Li Auto has a trailing 12 month Price to Earnings (P/E) ratio of 19.5 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 0.38 in contrast to the S&P 500's average ratio of 4.74
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Li Auto is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.6 and 3.19 respectively
