What Are Analysts Recommending for Automakers?
Decoding the Auto Industry's 1Q16 Earnings
Automakers in 2016
Previously, we talked about some factors that may prove to be positive for automakers going forward. In this part, we’ll take a look at what Wall Street analysts are recommending for mainstream auto companies.
Investors should pay attention to analysts’ recommendations, as they might affect the company’s stock price movement. If a popular analyst changes his or her view, it can cause a significant short-term movement in the stock price.
Analysts’ recommendations
According to Wall Street analysts’ consensus compiled by Bloomberg, recommendations for mainstream automakers (XLY) are as follows:
General Motors (GM): As of May 16, 2016, 52% of analysts covering GM stock have given it “buy” recommendations. The remaining analysts recommended a “hold.” Interestingly, no analysts out of the 21 gave GM a “sell” recommendation. GM’s consensus 12-month target price was $37.93 with a return potential of ~24% from the current market price of $30.67.
Ford (F): Of the 20 analysts covering Ford stock, 60% have given it a “hold” recommendation, while 35% have given it a “buy” recommendation. Only one analyst has given it a “sell” recommendation. Ford’s consensus 12-month target price was $15.71 with a return potential of 18% from the current market price of $13.32.
Fiat Chrysler Automobiles (FCAU): About 53% of analysts have given it a “buy” recommendation, while 27% have given it a “hold” recommendation. Six of the 30 analysts covering FCAU have recommended a “sell.” The company’s 12-month consensus target price was $10.04 with a return potential of 34% from the current market price of $7.52.
Ferrari (RACE): About 56% of analysts have given it a “buy” recommendation, while 19% have given it a “hold.” Four of the 16 analysts covering RACE have recommended a “sell.” The company’s 12-month consensus target price was $48.39 with a return potential of 11% from the current market price of $43.62.
Conclusion
Among all these automakers, Fiat Chrysler stands out, with most of the analysts covering the company favoring a “buy” with the highest upside potential of 34%. Before making any investment decision based on these recommendations, investors should pay attention to a company’s valuation to time the entry and exit from a stock.
In the next article of this series, we’ll look at the valuation multiples for these automakers.
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