Why Li Auto stock accelerated 10.6% today

Wednesday the stock spray of an electric vehicle (EV), Li Auto (LI 10.62%)it was a race car tearing up the track on thursday. The Chinese company’s American Depository Receipts (ADRs) rose 10.6% during the trading session not because of any new news from the company, but rather on the back of optimistic new analysis. This increase in the share price was much larger than the 0.1% increase in the S&P 500 index.

A quick comeback

Li Auto’s slide on Wednesday (down 16%) followed the company’s second-quarter earnings report. The fundamentals disappointed investors, even as the electric vehicle maker met the analyst consensus estimate for revenue and beat the estimate for net income.

Some experts clearly felt this was an overreaction and reiterated or supported their bullish views on Li Auto’s future today. One was City Groupto Jeff Chung, who reiterated both his buy recommendation on the stock and his $26.20 price target per share.

In Chung’s estimation, Li Auto, which has carved out a niche as a maker of extended-range electric vehicles (EREV), wrote that the company is the first mover in its home market in this segment. He also believes that the company will be able to gain market share in the high-end SUV market “thanks to its competitive products with level 2.5 ADAS (advanced driver assistance systems) solution and superior functionality.”

The company should continue to be a major player in China

It is a truism that equity markets frequently outperform when positive or negative news hits the headlines. Li Auto certainly seemed to be a victim of this on Wednesday. But the company is still a strong presence in the Chinese vehicle space and is selling to a market clearly hungry for next-generation sustainable mobility. So today’s move back makes sense.