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Li Auto shares tumble despite higher guidance

 

Monday, December 12, 2022

The news shaping the markets today

Russia’s forces shelling Ukraine’s Dnipropetrovsk and neighbouring territories with rockets and artillery sent the US dollar index higher this morning.


Japan’s producer prices rose 9.3% year-over-year in November, following a 9.4% rise in the previous month. However, the latest reading came in above expectations, exerting pressure on the JPY/USD forex pair.


Irish BNP Paribas Real Estate construction PMI fell to 46.8 in November, from 47.4 a month ago. This being the second consecutive month of contraction in construction activity sent the EUR/USD pair lower in forex trading this morning.


Saudi Arabia’s gross domestic product grew by 8.8% year-over-year in the third quarter, slowing from 12.2% growth in the second quarter, which exerted pressure on the SAR/USD forex pair.


New Zealand’s number of visitor arrivals climbed by 4283.8% year-over-year to 161,631 in October. However, the NZD/USD pair fell slightly in forex trading this morning.

 

What’s happening: Shares of Li Auto tumbled on Friday after the company released results for its third quarter.

What happened: The Chinese electric vehicle maker reported weaker-than-expected results for the latest quarter.

However, the company issued strong forecast for the fourth quarter for some of its key metrics.

How were the results: The automaker reported a wider loss for its third quarter, with the missing market views.

  • Sales surged 20.2% year-over-year to 9.34 billion yuan ($1.31 billion), but missed the consensus estimates of $1.40 billion.
  • Net loss widened to 1.65 billion yuan ($237.55 million), from the year-ago loss of 21.5 million yuan.
  • Non-GAAP net loss per ADS came in at 18 cents per share, lower than the Street expectations of 15 cents per share

Why it matters: Several automakers have been impacted by rising costs of materials and worldwide shortage of chips. The company’s peers Xpeng and Nio also posted higher losses for the latest quarter amid rising inflation.

Li Auto said that it expects deliveries to increase and production to grow going head, with the easing of global supply chain issues. Deliveries of Li ONEs rose 5.6% year-over-year to 26,524 units, although they declined 7.5% on quarter.

Vehicle sales grew 22.5% year-over-year to 9.05 billion yuan, while vehicle margins narrowed 910 basis points to 12%. The company posted an operating loss of 2.13 billion yuan, wider than the loss of 97.8 million yuan recorded last year.

Li Auto’s President and Director, Yanan Shen, announced his resignation and the company named Donghui Ma, chief engineer, as his replacement, effective January 1, 2023.

“Looking ahead, we are optimistic that with rapid production ramp-up, rigorous execution, and responsible cost management, we will realize greater economies of scale and further drive down costs, putting us back on track to hit our profitability inflection point,” CFO Tie Li said during the earnings call.

Management guided to revenues of 16.51-17.61 billion yuan ($2.32-$2.47 billion), representing growth of up to 65.8%. Li Auto is looking to deliver between 45,000 and 48,000 vehicles in the fourth quarter, representing up to 36.3% growth from a year earlier.

How shares responded: Li Auto’s shares fell 12.4% to close at $21.12 on Friday, following the release of quarterly results. The stock lost another 1.8% in the after-hours trading session.

What to watch: Investors will keep an eye on rising inflation and supply chain issues, which could significantly impact the company’s overall results ahead.

The markets today

UK stocks will be in focus today ahead of a basket of economic reports

Context: The FTSE 100 index moved higher on Friday, amid an increase in financial stocks.

Details: Financial stocks rose on Friday, with the investment banking and brokerage services index adding 0.7% and banks increasing 0.8% after the country disclosed 30 measures to overhaul the financial sector in a bid to accelerate growth.

Investors await the Bank of England’s rate decision this week, with markets projecting the central bank to hike interest rates by 50 basis points, despite recession concerns.

Signs of China’s government slowly easing its strict covid-19 restrictions also provided some support to markets on Friday.

London’s FTSE 100 index gained 0.06% to close at 7,476.63, after recording losses for three straight sessions. The domestically focused FTSE 250 Index climbed 0.49% to 18,916.00, after tumbling to a one-month low in the prior session. However, both the indices settled the week with losses.

What are expectations: Investors await economic data on GDP, industrial production and balance of trade from the UK today. The British economy, which shrank by 0.6% in September, is expected to grow by 0.4% in October. Analysts expect industrial production to contract by 2.7% year-over-year in October, following a 3.1% decline in the previous month. The UK trade deficit, which shrank to £3.1 billion in September, is expected to widen slightly to £3.2 billion in October.

Other Markets: US indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.90%, 0.73% and 0.70%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0508 and 1.0513 Positive
USD/CHF – 0.9364 and 0.9369 Positive
NZD/USD – 0.6384 and 0.6389 Positive
Gold – 1798.66 and 1800.26 Negative
Platinum – 1021.80 and 1023.55 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0516, -0.17%) Dow ($33,710, -0.09%) Brent ($76.58, 0.6%)
GBP/USD (1.2223, -0.32%) S&P500 ($3,929, -0.17%) WTI ($71.73, 1%)
USD/JPY (136.90, 0.24%) Nasdaq ($11,659, -0.21%) Gold ($1,799, -0.7%)

What else to watch today

Turkey’s unemployment rate, current account, and car production, Brazil’s industry confidence indicator and central bank of Brazil’s focus market readout, India’s consumer price index, industrial production and manufacturing production, Mexico’s industrial production, US consumer inflation expectations and government budget, South Africa’s SACCI business confidence index, as well as Spain’s consumer confidence indicator.


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