Li Auto stock price could dive by 20% if this happens

Li Auto (NASDAQ: LI) stock price has come under pressure in the past few days as concerns about the electric vehicle (EV) industry continued. The shares dropped to a low of $22.50, which was a few points below the year-to-date high of $$27.52. It remains about 85% above the lowest level in 2022, meaning it has outperformed Nio.

Is Li Auto a good investment?

Li Auto has become one of the biggest electric vehicle companies in the world. Valued at over $21 billion, the company sells several vehicle brands, including Li L9, Li L8, and Li One. The firm started producing company in 2019 and has started ramping up production.

The most recent vehicle deliveries report showed that the company delivered 20,823 vehicles in March, higher than the estimated 20k. Its sales jumped by 88.7% year-on-year basis. As a result, the company’s deliveries jumped by 65.8% year-on-year to 52,584. In total, the company has sold over 305k cars. The firm’s CEO said:

“We are also very excited to see that Li Auto has captured nearly 20% market share in the RMB300,000 to RMB500,000 SUV market in China, and become a brand of choice among premium family SUVs.”

Analysts believe that the company’s growth will continue growing in the next few years as it unveils more models. In the recent Shanghai auto show, the company said that it will increase the number of vehicle models to 11 as it seeks to gain more market share.

Analysts believe that Li Auto has a long runway for success. For one, the company’s annual revenue jumped from over $40 million in 2019 to over $6.56 billion in 2022. Estimates are that the company will make $13.5 billion in 2023 and hit $48 billion by 2031. If this happens, Li Auto will have become one of the biggest auto companies in the world.

Li Auto stock price forecast

LI chart by TradingView

The daily chart shows that the Li share price has drifted downwards recently, because of the relatively weak Tesla earnings. The shares have moved slightly below the 25-day and 50-day exponential moving averages. It is also between the ascending channel shown in black and the 38.2% Fibonacci Retracement level.

Therefore, for now, I suspect that the shares will continue falling as sellers target the next key support level at $18.04, the lowest point on December 27. This price is ~20% below the current level. This breakdown will be confirmed if the shares move below the key support at $22.