Today we’ll be discussing three car stocks to buy as the North American International Auto Show returns to Detroit after a three-year absence. Although it was a smaller event than in previous years, Wall Street was eager to see which automakers were rolling in the fast lane.
In 2021, car sales figures in the United States were strong. US car sales approached 15 million, trailing China at around 21.5 million. That said, automakers have faced several challenges so far this year.
For starters, semiconductor shortages coupled with rising raw material and shipping costs weighed on the company’s operations and earnings. At the same time, new car sales have slowed as consumers battle fears of lingering inflation and a recession. According to the National Automobile Dealers Association, new car sales in the second quarter of 2022 are down more than 25% from a year earlier.
Nevertheless, all is not bleak in the automotive industry. Luxury cars and high-margin SUVs gained market share from cars in the first half of 2022, while electric vehicle (EV) sales grew 66% in the second quarter year-on-year other.
Recently, Congress passed the Inflation Reduction Act (IRA), a more than $430 billion spending program focused on energy transition and reducing carbon emissions. The law, which also includes investment tax credits for electrification, is expected to accelerate the adoption of electric vehicles in the United States. Meanwhile, with the average age of cars on US roads at record highs, consumers are expected to gradually start buying new vehicles, which will translate into higher incomes. for automakers.
That said, here are three car stocks that are well positioned to thrive in the months ahead.
|HAIL||SPDR S&P Kenosha Smart Mobility ETF||$33.50|
52 week range: $167.45 – $278.78
Based in Italy Ferrari (NYSE:RACE) is well known for its luxury sports cars, and it is also often associated with the Formula 1 racing team. That said, the company generates well over half of its revenue in the United States.
Ferrari released robust second-quarter financial statements in early August, demonstrating its resilience in the face of recent economic turmoil. In addition to record revenues of 1.3 billion euros, profits also rose by double digits compared to the previous year.
Thanks to its cash-rich customers, the iconic automaker shipped 3,455 units during the quarter. Wall Street was pleased to see management raise its full-year guidance across all metrics.
As part of its strategic plan, Ferrari is expanding into new segments, such as SUVs. Meanwhile, it is gearing up to unveil its first electric supercar in 2025. The company aims to have 15 new launches and 60% of its lineup electrified by 2026.
RACE stock is down more than 23% year-to-date (YTD). The shares are trading at 32.36 times forward earnings and 7.72 times sales. Analysts’ 12-month median price forecast for Ferrari is $243.50. Potential investors might consider a drop towards the $180 level as a better entry point.
SPDR S&P Kensho Smart Mobility (HAIL) ETF
52 week range: $33.32 – 64.23
Dividend yield: 1.41%
Spending rate: 0.45%, or $45 on an initial investment of $10,000
Our next discussion is about an exchange-traded fund (ETF) that could attract potential investors to the smart transportation industry. The SPDR S&P Kensho Smart Mobility ETF (NYSEARC:HAIL) offers exposure to US-listed automotive stocks that typically focus on autonomous and connected vehicle technology, drone technology, as well as advanced transportation tracking systems.
HAIL began trading in December 2017. This ETF tracks the S&P Kensho Smart Transportation Index and currently has 93 holdings.
In terms of sub-segments, automobile manufacturers lead with 22.20%. Next come automotive parts and equipment (12.5%) and semiconductors (11.4%). The top 10 holdings represent about 18% of the $77.4 billion in net assets.
Manufacturer of hydrogen fuel cell systems Plug hole (NASDAQ:PLUG); EV manufacturer Rivian Automotive (NASDAQ:SHORE); Israel-based sensor and vision software provider Innoviz Technologies (NASDAQ:INVZ); EV Charging Equipment Supplier flashing charging (NASDAQ:BLNK); and heavy duty EV You’re here (NASDAQ:TSLA) are among the most prominent names on the list.
HAIL is down more than 34% since January and is currently paying a dividend of 2.31%. The price/earnings (P/E) and price/book (P/B) ratios stand at 10.64x and 1.90x respectively.
According to Precedence Research, the global smart mobility market is expected to reach $250 billion by 2030. Such an expansion would mean a compound annual growth rate (CAGR) of more than 20% between 2022 and 2030. So investors who looking to take advantage of the long term secular growth in the smart transportation industry may consider investing in HAIL around these levels.
52 week range: $11.37 – $21.92
Based in the Netherlands Stellantide (NYSE:STLA) was created in January 2021 following the merger between Fiat Chrysler Automobiles and the PSA group. Through its global network, Stellantis offers a wide range of products with 14 automotive brands, such as Alfa Romeo, Chrysler, Fiat, Jeep, Peugeot, Citroën and Opel.
The recent earnings report showed a strong performance in the first half (HY1). Net revenues increased 17% year-on-year while profits also soared. Thanks to the company’s strong cash position, Stellantis can focus on expanding its operations with a focus on electrification.
According to first-half figures, Stellantis ranks second in sales of battery electric vehicles (BEVs) and low-emission vehicles (LEVs) in the EU30 market, which includes 30 European countries. It also came in third in the United States for LEV sales.
In its Dare Forward 2030 plan, Stellantis has set a target for BEVs to account for 100% of its sales in Europe and 50% in the United States by 2030. At the same time, the automaker is investing in battery technology in cooperation with LG Energy Solutions in Canada and Samsung SDI in the United States
So far this year, STLA stock is down more than 27%. Its current price supports an 8% dividend. Shares change hands at 2.86 times forward earnings and 0.26 times sales. Finally, the 12-month median price prediction stands at $20.59. Interested readers might consider buying Stellantis’ declines relative to other auto stocks.
As of the date of publication, Tezcan Gecgil, Ph.D., had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.