We recently compiled a list of the 10 Worst Performing NASDAQ Stocks in 2024.In this article, we are going to take a look at where Li Auto (NASDAQ:LI) stands against the other Worst Performing NASDAQ Stock in 2024.
Factors Driving Market Growth
Markets have been soaring for the better part of the year, with pullbacks acting as entry levels from where investors have joined and pushed the market higher. While artificial intelligence was one of the factors that drove many tech stocks higher, earnings results that were better than expected also had a significant impact.
Similarly, a resilient US economy that has stayed clear of recession amid high interest rates and inflation has also supported the upward momentum. With the NASDAQ and other major indices at all-time highs, investors are becoming increasingly concerned whether the strong upward momentum is sustainable.
Valuations appearing overstretched after one of the longest bull runs are one factor that is sending jitters among the investment community. Similarly, concerns over the negative impact of high interest rates and uncertainty over the US election are slowly curtailing the upward momentum.
Bryn Talkington, managing partner of Requisite Capital Management, believes markets will remain choppy heading into year-end owing to the uncertainty around the US election.
“Until the election is over and we can confirm gridlock, I think at the headline number we’re not going to do much, but I think underneath the surface we’re going to see the haves and have nots,” she said.
Nevertheless, it is the impact of the soaring geopolitical tensions in the Middle East that threatens to affect supply lines that are keeping the markets on edge. The prospects of energy prices surging and fueling inflation on Israel attacking Iran is also taking a significant toll on investor’s sentiments on equities.
While interest rate cuts were expected to be the catalyst to push the equity markets to record highs, that was not the case, as everything seemed to have already been priced. Paul Christopher, head of investment strategy at Wells Fargo Investment, believes the US Federal Reserve is unlikely to cut aggressively as the better-than-expected jobs report in September and renewed worries of a spike in inflation act as a deterrent.
“Just really not ready to cut quite as aggressively as the markets had previously priced. I think if you take November from a half a point down to a quarter point hike, that’s not really a big deal, but it does require some adjustment in markets. There may be some adjustments to rate expectations for December and January as well,” he told CNBC’s “Squawk Box Asia” earlier this month.
While the US economy does not show enough deterioration to justify aggressive cuts, there are stocks listed on the NASDAQ that have underperformed, attributed to a number of factors. Top on the list are companies whose core businesses are negatively impacted by high interest rates that tend to affect consumer purchasing power.
Likewise, some of the worst-performing stocks in the NASDAQ have also taken a hit on high inflation. While inflation has started showing signs of edging lower even as the Fed continues to cut rates, some of the worst-performing stocks are showing signs of bottoming out as macroeconomics improves.
The October BofA Global Fund Manager survey indicates that investors are more optimistic than they have been in four years. 74% of investors think the United States will avoid a recession, demonstrating their optimism about the economy.
Likewise, Michael Hartnett, an investment strategist at BofA, said that investor sentiment is rising due to expectations of further rate cuts by the U.S. Federal Reserve and hopes that Beijing will release more stimulus to strengthen its economy.
Source: Pixabay
Our Methodology
We utilized a stock screener to find NASDAQ-listed stocks with market caps exceeding $2 billion as of October 16. We then sorted the stocks in descending order based on their year-to-date share price performance. From this dataset, we identified the NASDAQ stocks with the largest YTD share price declines as of October 16. The following stocks are listed in descending order of their share price performance.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Li Auto Inc. (NASDAQ:LI) is one of China’s biggest automakers, designing, developing, manufacturing, and selling premium smart electric vehicles. It has sought to differentiate itself from the competition in selling extended-range electric vehicles (EVs).
Nevertheless, the Chinese EV giant has had a rough run in the market, going down by 26.09% and cementing its position as one of the worst-performing NASDAQ stocks in 2024. The company’s sentiments took a hit early in the year, disappointing investors with guidance that raised concerns about its core business.
Li Auto Inc. (NASDAQ:LI), saying it was poised to ship between 100,000 and 103,000 electric vehicles in the first quarter, could have gone better with the market. That’s because the guidance was way lower than the 131,805 cars that the company shipped in the fourth quarter. The company delivered 80,400 vehicles in the first quarter, missing its guidance by a big mark, affirming slowing growth.
Additionally, the stock’s sentiments took a hit after the company’s fully electric car, Li Mega, failed to boost sales in the second quarter as expected. The car only boosted vehicle revenues by 8.4%, raising serious questions about demand in the market as the company battles stiff competition from the likes of Tesla.
Nevertheless, Li Auto Inc. (NASDAQ:LI) delivered better-than-expected second-quarter results, earning $0.10 a share as sales reached $4.4 billion. However, declining vehicle margins are once again raising serious concerns about Li Auto cutting vehicle prices as it tries to fuel sales. Operating margin came in at 1.5%, up from a negative margin of 2.3% in the first quarter but lower than the 5.7% in the same quarter of 2023.
The number of hedge funds holding Li Auto Inc. (NASDAQ:LI) dropped from 29 to 17, reflecting a decline in interest among hedge funds.
Overall LI ranks 8th on our list of 10 Worst Performing NASDAQ Stocks in 2024. While we acknowledge the potential of LI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LI, check out our report about the cheapest AI stock.
