CFRA analyst Aaron Ho downgraded Li Auto (NASDAQ: LI) from Hold to Sell with a price target of $24.00.

The analyst commented, "We keep our 12-month target price of USD24. The valuation reflects a 2023 P/B of 4.2x, a discount to Li Auto's 2020-2022 average P/B of 6.2x to price in its weakness in profit margins. Li Auto posted a net profit of CNY934 million in Q1 2023 on a 96% expansion in revenue vs. a net loss of CNY11 million in Q1 2022. We believe revenue growth will remain at more than 50% in 2023-2024 on new model releases. We are neutral on Li Auto's fundamentals mostly due to the fierce competition in China's EV market, which limits average selling price gains while keeping research and development and marketing expenses high, especially as Li Auto embarks on multiple product strategy in 2023. Hence, we remain cautious on Li Auto's profitability momentum given the contracting vehicle and gross margins in Q1 2023 and revise our opinion to Sell. We now project a 2023 EPS of CNY0.43 (from a loss per share of CNY1.91) and trim our 2024 EPS forecast to CNY1.03 (from CNY1.19)."

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Shares of Li Auto closed at $34.41 yesterday.