One of the standouts of today's afternoon trading session was Li Auto, which logged a 7.4% performance and outperformed the S&P 500 by 7.0%. The Auto Manufacturers stock is now trading at $26.28 per share and may still have upside potential because it is still -10.44% under its average target price of $29.34. Analysts have set target prices ranging from $18.159058 to $39.1058 dollars per share, and have given the stock an average rating of buy.
For the greater market's outlook on the stock, we can use Li Auto's short interest as a proxy. The short interest represents the proportion of the float's shares that are tied to short positions, meaning that the investor believes the stock will decline in the future. Here, the stock's short interest is 6.4% which means the outlook is split.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One measure of the market sentiment regarding a stock is its rate of institutional ownership, which in the case of Li Auto stands at 5.9%. This indicates a lower than average rate of institutional ownership -- but what does that have to do with sentiment regarding the stock?
The reason we look at institutional ownership is that institutions such as hedge funds, pension funds, and mutual funds have vast research capabilities. They are often close to management, speaking to them one-on-one and gaining an understanding of the opportunities and challenges they face. Thus, if an institution is willing to place their capital in a company, it's likely that their due diligence has shown it is a safe bet.
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 $1.07
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Li Auto has a trailing 12 month Price to Earnings (P/E) ratio of 24.6 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 0.36 in contrast to the S&P 500's average ratio of 4.74
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Li Auto is a Industrials company, and the sector average P/E and P/B ratios are 24.03 and 2.89 respectively
