The struggling electric vehicle (EV) sector needed a gain in the stock market, and it got it on Monday. Thanks to some good news from one of their own companies, numerous electric vehicle companies saw their stock prices rise that day. Among them was the industry's figurehead, Tesla (NASDAQ: TSLA), which gained nearly 4% on the S&P 500 Index decline of 0.4%.
Li Auto beats estimates in fourth quarter
The company that delivered the goods at the start of the trading week was a major Chinese electric vehicle manufacturer Li car, which reported its fourth-quarter results this morning. Fortunately for anyone investing in or otherwise involved with the EV sector, Li Auto delivered a stunning earnings beat, managing to beat analysts' revenue estimates due to a surge in car deliveries.
This helped ease the lingering pain caused by Tesla's own fourth-quarter performance. Investors in the American company won't be happy to be reminded that the EV king missed on both bottom and bottom lines, with the former up just 3% year-on-year and the latter up a measly 40% went back.
This, coupled with slowing growth in electric vehicle sales in general, left investors bearish on the industry as a whole.
Buyer beware
This mood was reversed with the Li-Auto numbers. Perhaps the rising optimism that had previously supported electric vehicle inventories is returning.
However, I don't think this will lead to a long rally. Even after the recent slump, Tesla and the better-known electric vehicle stocks still have lofty valuations that I don't think are justified by their declining growth prospects. The performance of a single company, no matter how impressive, is not enough to make this expensive sector attractive again in the long term. However, that could change if other electric vehicle makers deliver significant earnings surprises.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in Tesla and recommends them. The Motley Fool has a disclosure policy.
“Why Tesla Stock Is Up Nearly 4% Today” was originally published by The Motley Fool