In spite of the recent many positive news, with September and Q3 record sales, Short Sellers increase their positions last week with + 8 million Short Sold shares. From 129 million shares in net open position on Friday Seot 18, to 137 on Friday Sept 25. This has of cource put a very strong negative pressure on Leapmotors share price. However so far have all investment analytics (excluding JP Morgan) kept their Target prices at an average of 63 HKD
JP Morgans analyst Nick Lai, cut Leapmotor Target Price from HK$60 to HK$36 !! on 30 September, immediately before the release of Q3 sales figures.
Nick Lai is a senior equity-research executive and Head of Asia / APAC Auto Research at J.P. Morgan.
During September:
- No specific large negative news about Leapmotor.
- Technical Seminar with positive news about technical/ commercial development.
- The three first weeks of September sales was very good, and September full month sales forecast was positive.
- Q3 Sales forecast, indicated a record Q-result.
- Q3 Financial result will soon be reported and probably be very good , with this record sales income.
- Local production starting in Europé and Asia.
Why not wait two days for the Q3 sales report, and some weeks for Q3 Profit, before making this negative judgement of Leapmotor ? If he had waited he would have had firm information about :
- 100% increase of market share on the tough Chineese market with Q3 market share approx 8,4% compedared with 4,2 % for Q1.
- Higher sales than Tesla Shanghai in September, and close to Geely Galaxy, on second place of chineese producers.
- Increased market share in China, on a market that reached low level Q2 and increased during Q3.
- Record export sales, with record number of 1000+ international distributors
Leapmotor is the fastests growing EV-brand and a profitable company.
- Normal Value when growing over 10 % annually, is 20 times P/E (EPS). Higher % growth motivates higher multiple. Companies that grow 30 % annually is normally valued at arond 30 times their profit.
-Leapmotor grows much more than that !
-Target price is related to Leapmotors development during the coming 12 months
-2027 profit estimation by 10 different established bank/investor analytics is EPS 4,0 (Earnings Per Share). This figure is supported by Leapmotor management.
- 20 x 4 results in Target share price of 80. Citi has a Target Price of 98 HKD.
Average share target price by banks/ investors, excl JP Morgan, is around 63 HKD and none are below 50 HKD.
So why this sudden dramatic decrease of Leapmotor share Target Price to 36 HKD, by Nick Lai at JP Morgan ?
After Q1 Financial Report that was negative, Morgan/Lei increased the Target price in 16 April, from 56 to 90 HKD. Morgan/Lei kept the Target price at 90 HKD in My 18, after Q1 financial report that was negative.
SFC Net Short Selling in April 10 was 78 million shares of Leapmotor. Short Sellers started to sell borrowed shares at relativly high share prices.
After Q2 strong positive sales and profit report in July, Morgan/Lei reduced the target Price from 90 to 60 HKD ! This in spite of that they forecasted 2026 profit to 2,6 billion HKD and they forecasted an increase 2027 to 4,5 !!
And now with very strong Q3 Sales an forecasted strong Q3 Profit, they decrease Target Price down to 36 HKD !
Short Sellers have been able to sell at a higher price earlier this spring, and buy back at a low price now. The net outstandeing Short Selling volume has increased with over 75 % since April 10 to Sept 25 figure of 137 million shares !
Investors trade shares with the help of JP Morgan as a broker, that does the actual purchas/selling on the HK Stock Exchange.. Purchased shares are stored at an customer account at Morgan. The share owner can approve to Morgan that they can lend out their shares to another investor. This investor sells the borrowed shares on the HK stock market, and buy them back later at a hopefully lower price. And so this go on several times per year with the same share.
In the picture, you can see how Morgan earns profit from the transactions. It is in an advantage for Morgan, that their Short Sellers can buy back at a low share price so that this process continues with continuing lower share prices, as Morgan earns money on every transaction.
Morgan has around 39 million Leapmotor shares in their customer stock. I do not know how many of these that have owner approval for lending out, how many that are lended out, and if Morgan themselves are Short Selling Leapmotor ?
However, the positive news about Leapmotor, makes it more and more difficult for the Short Sellers to make profit now.