BofA Securities downgrades Li Auto stock to Neutral on weak guidance

BofA Securities downgraded Li Auto (LI) to Neutral with a reduced price target of $26, citing the company's significantly lower Q3 2025 sales volume guidance of 90,000-95,000 units, representing a 38-41% year-over-year decline, and intensified market competition. This follows Q2 2025 earnings that missed analyst expectations for both EPS and revenue, prompting BofA to cut future volume and earnings estimates by over 30%, underscoring growing competitive headwinds for the Chinese EV manufacturer.

Analysis

Li Auto (LI) is facing significant headwinds, evidenced by a downgrade from BofA Securities to Neutral from Buy and a price target reduction to $26. The primary catalyst for the downgrade is the company's weak Q3 2025 guidance, which projects vehicle deliveries of 90,000-95,000 units—a stark 38% to 41% year-over-year decline and a 16% sequential drop. This sharp deceleration is attributed to intensified market competition. The negative outlook follows a Q2 2025 performance that fell short of expectations, with revenue of $30.24 billion and EPS of $1.37 missing consensus forecasts. In response, BofA has materially lowered its forward estimates, cutting non-GAAP EPS projections for 2025, 2026, and 2027 by 38%, 33%, and 31%, respectively, signaling deep concerns about future profitability and market share. While analyst sentiment is predominantly bearish, with Barclays also trimming its price target to $24, a complete consensus is lacking, as Tiger Securities maintained a Buy rating. This divergence, coupled with a reported pre-market stock rise, suggests the market is still grappling with whether the recent 26% stock decline has fully priced in these competitive pressures.

Key Decisions for Investors

• Investors should be cautious of the sharply deteriorating growth outlook, as the projected 38-41% year-over-year decline in Q3 deliveries signals a potential fundamental shift in Li Auto's market position due to intense competition.
• The significant downward revisions to earnings estimates by multiple analysts, particularly BofA's cuts of over 30% for the next three years, warrant a re-evaluation of long-term profitability models for the company.
• Monitor upcoming monthly delivery figures and gross profit margin reports closely to gauge whether the weak Q3 guidance represents a temporary setback or the beginning of a sustained period of market share loss.