BofA cuts EHang stock price target to $24, maintains buy rating

BofA Securities reduced its price target on EHang Holdings to $24 from $26, maintaining a Buy rating despite disappointing Q1 2025 results that showed a 58% year-over-year sales decline to RMB 26 million due to lower eVTOL deliveries (11 units vs. expected 60). While gross profit margin slightly improved to 62.4%, operational expenses significantly increased, leading to a larger-than-expected non-GAAP net loss of RMB 31 million; however, analysts remain bullish, anticipating revenue doubling this fiscal year, supported by EHang's recent operational certificate and strategic positioning in the eVTOL market.

Analysis

EHang Holdings (NASDAQ:EH) reported a challenging first quarter of 2025, with sales significantly declining to RMB 26 million, a 58% year-over-year and 84% quarter-over-quarter drop, primarily due to delivering only 11 electric vertical take-off and landing (eVTOL) units against an expectation of 60. BofA Securities attributed this shortfall to seasonal factors, extended local government procurement approval processes, and customer caution awaiting the Operational Certificate (OC), which EHang successfully obtained in late March 2025. Despite the revenue decline, EHang's gross profit margin (GPM) improved slightly to 62.4%, compared to an anticipated 62% and consistent with its trailing twelve-month GPM of 61.37%, supported by higher selling prices for its EH216 series products. However, operational expenses relative to sales escalated sharply to 425%, a 250 percentage point year-over-year increase, leading to a non-GAAP net loss of RMB 31 million, which was more substantial than BofA’s estimate of an RMB 12 million loss. Despite these Q1 headwinds and BofA Securities reducing its price target on EHang from $26.00 to $24.00, the firm maintained its Buy rating, signaling belief in the company's potential for recovery and growth. This optimism is somewhat underscored by a broader bullish analyst consensus, which projects EHang's revenue to double in the current fiscal year, and is further supported by positive developments such as a robust Q4 2024 performance (190% YoY revenue growth to RMB 164.3 million, improved EPS of -0.33), achieving its first positive adjusted net income for 2024, and its Hefei joint venture securing the world's first pilotless eVTOL air operator certificate. EHang maintains a solid short-term liquidity position, evidenced by a current ratio of 2.89, and has affirmed that recent U.S. tariff changes will not affect its operations due to its lack of U.S. exports and secure supply chain.

Key Decisions for Investors

• Investors should weigh the significant Q1 2025 operational underperformance and increased net loss against the company's strong underlying gross profit margins, the crucial Operational Certificate attainment, and continued bullish analyst sentiment for long-term growth in the eVTOL market.
• Closely monitor the ramp-up of eVTOL deliveries in subsequent quarters, as this will be a key validation of market acceptance post-OC and the company's ability to achieve its ambitious revenue growth forecasts.
• Consider the high operational expenditure and its impact on near-term profitability, alongside the inherent volatility and execution risks in the nascent eVTOL industry, while acknowledging positive catalysts such as recent analyst initiations, upgrades, and strategic certifications that support the growth narrative.