Company / Analytics

Analytics, 08 October 2021

Top Auto Stocks to Invest In

The automotive industry has been among the worst affected by the Covid-19 pandemic, as repeated lockdowns and restrictions in the past year caused a decrease in vehicle manufacturing and sales. Sales in China plunged by 71%, 41% in the United States, and 80% in the European market. Presently, the industry is facing a semiconductor crisis (chip) crisis.

But while the entire industry took a massive hit, the future is not so bleak. Analysts at Moody predict that sales growth of the automotive industry will rise by 11.5% in 2021, while a survey conducted by McKinsey showed the global consumer intent to purchases automobiles is close to pre-Covid-19 levels, with a significant focus on Electric Vehicles.

The Automotive Industry

Consumers are increasingly becoming aware of automobile sustainability, as evidenced in the rise in sales of electric vehicles which went up by 43% in 2020 and pushed the industry towards cleaner, electric automobiles.

The rise in automotive corporations centered around EVs and a global push to combat greenhouse gas emissions by taxing automakers has caused traditional car manufacturers to shift towards cleaner energy options. The $1.74 billion European Green Vehicles Initiative aids in this endeavor. A 2020 Study by Deloitte found that 21% of the total respondents in the United States were planning on purchasing a hybrid or battery electric vehicle.

With these in mind, investors might be considering investing in auto stocks. We highlight some of the top auto stocks to consider.

1. General Motors

General Motors Company is a multinational automotive corporation that designs and manufactures automobiles, through the multiple brands the company owns, including Chevrolet, GMC, and Cadillac.

The Michigan-based company has a market capitalization of $77.13 billion. At the end of the second quarter of 2021, 86 hedge funds held stakes worth $7.41 billion in General Motors Company.

In its August 2021 quarterly earnings report, GM reported earnings per share at $1.97, crossing estimates by $0.14. The company also reported revenues at $34.17 billion, an increase of 103.64% on a year-over-year basis, surpassing predicted revenues by $4.49 billion.

In late September, Goldman Sachs analyst Mark Delaney lowered the firm’s price target on General Motors Company to $59 from $62 but kept a Buy rating on the shares. Meanwhile, in its Q4 2020 investor letter, Junto Investments stated that the value of General Motors Company is far greater than is reflected on the markets.

2. Tesla Inc.

Tesla is famous for its design and manufacture of electric vehicles and clean sustainable energy solution and products, including solar panels and battery energy storage units, among others. The company has a market capitalization of $767 billion.

In the second quarter of 2021, Tesla reported an EPS of $1.45, beating estimates by $0.47. The company’s revenue in the quarter came in at $11.96 billion, an increase of 98.1% on a year-over-year basis, beating revenue estimates by $559.33 million.

At the end of the second quarter of 2021, 60 hedge funds held stakes worth $9.29 billion in Tesla. Analysts have maintained an Outperform rating on Tesla, Inc. with a price target of $1,000 on its shares.

3. Ford Motor Company

Ford Motor is a multinational automobile manufacturer. Based in Michigan, the company engages in the sales of both, commercial and luxury vehicles through its brand names, Ford and Lincoln. The automobile company ranks third on our list of the 11 best auto stocks to invest in.

At the end of the second quarter of 2021, 55 hedge funds held stakes worth $2.10 billion in Ford Motors compared to 49 in the preceding quarter with stakes worth $2.19 billion.

For the second quarter of 2021, Ford Motor declared its EPS at $0.13, beating market predictions by $0.10. In addition to the EPS, the company reported revenues of $24.13 billion, surpassing forecast estimates by $1.13 billion.

4. Magna International

Magna International, Inc. is a manufacturing company based in Canada, that produces and supplies automotive systems, modules, and components. Magna International has a market capitalization of $23.07 billion.

In its August quarterly earnings report for the second quarter of 2021, Magna reported earnings per share at $1.40, missing estimates by $0.01. Additionally, the reported revenues of $9.03 billion fell short of the market predictions by $248.8 million.

In late September, Goldman Sachs analysts lowered their price target on Magna International, to $102 from $105 but kept a Buy rating on the shares. At the end of the second quarter of 2021, 39 hedge funds held stakes worth over $576 million in Magna International up from 34 in the preceding quarter that held stakes worth more than $671.7 million.

5. CarMax

Based in Virginia, CarMax Inc. is a retailer of used vehicles and engages in wholesale vehicle auctions. CarMax has a market capitalization of $20.72 billion. For the second quarter of 2021, the company reported earnings per share at $1.79, beating market estimates by $0.68. The revenue for the quarter was reported at $5.37 billion, crossing forecast predictions by $294.06 million. By the end of the second quarter of 2021, 39 hedge funds held stakes amounting to $1.6 billion in CarMax Inc.

On October 1, RBC Capital analyst Steven Shemesh lowered his price target on CarMax Inc. to $156 from $160 but kept an Outperform rating on the shares, noting that the second-quarter results of the company were “mixed”.

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