12 Most Promising Car Stocks According to Analysts
In this article, we discuss the 12 most promising car stocks according to analysts. To skip the detailed analysis of the automotive industry, go directly to the 5 Most Promising Car Stocks According to Analysts.
The car industry has been one of the most important industries in the world since Henry Ford installed the first moving assembly for the mass production of cars. It was valued at around $2.73 trillion in 2021, and the industry is expected to grow at a compound annual growth rate (CAGR) of 3.01%, reaching $3.57 trillion by the end of 2031.
Electric vehicles (EV) have been one of the most prominent growth catalysts for the global automotive industry. Nevertheless, EVs have experienced a decline in sales growth in 2023. One of our previous articles reports that the electric vehicle industry experienced a surge in the average days of inventory, rising from 52 days in January to a peak of 111 days in July and going down to 97 days by October.
Several EV stocks have also taken a beating this year. The KraneShares Electric Vehicles & Future Mobility ETF, which tracks companies directly involved in EV and EV component production, is down by 9.36% year-to-date (YTD) as of the December 15 market close. Some of the ETF’s biggest decliners have been Fisker Inc. (NYSE:FSR), Nikola Corporation (NASDAQ:NKLA), and Lucid Group, Inc. (NASDAQ:LCID), which are down by 76.45%, 59.14%, and 22.69% YTD, respectively. On the other hand, the EV leader, Tesla, Inc. (NASDAQ:TSLA) stock has gained 134.51% YTD. However, Wall Street analysts have mixed views about the company. Their average ratings and price targets show a neutral picture of the company.
Despite that, Piper Sandler believes that Tesla, Inc. (NASDAQ:TSLA) will be one of the top three companies that will dominate the EV market by 2030. The firm predicts that the company, along with the Chinese automaker BYD Company (BYDDF) and Rivian Automotive, Inc. (NASDAQ:RIVN), will account for 25% of all the EV sales in the US, Europe, and China.
Some of the reasons for the decline in EV sales include range anxiety and high costs among consumers and hybrid vehicles gaining more popularity in comparison. Ford Motor Company (NYSE:F) seems to be ahead of most companies in this hybrid trend and is planning to manufacture and sell thousands of gasoline-electric hybrid vehicles in the US over the next five years.
The short-term problems faced by the EV industry are expected to fade soon. Schmidt Automotive Research previously predicted that EV sales will plateau in 2024. The firm expects a strong recovery in sales between 2025 and 2030.
Despite the decline in EV sales growth, the segment showed strength in the third quarter. The total EV sales volume jumped over 300,000 for the first time in the U.S. market and is on track to surpass 1 million sales by the end of the year. In the third quarter, the EV sales volume experienced a nearly 50% year-over-year (YoY) gain. According to the International Energy Agency, the total EV sales (including plug-in hybrid vehicles) are expected to surpass 14 million by the end of 2023, compared to 10 million in 2022.
Keeping the above information in mind, some of the most promising car stocks, according to analysts, include Li Auto Inc. (NASDAQ:LI), Driven Brands Holdings Inc. (NASDAQ:DRVN), and OPENLANE, Inc. (NYSE:KAR).
Three racing cars competing side by side at a motorsports event, demonstrating the power and precision of the company's racing technology.
Our Methodology
For this article, we created a list of auto manufacturers and auto and truck dealerships using the Yahoo Finance stock screener. From that list, we picked up the 12 stocks with the highest average analyst price target upside as of December 15. We skipped the stocks with a high number of sell-side analysts.
We listed the stocks in ascending order of their average analyst price target, which has been taken from TipRanks.
Most Promising Car Stocks According to Analysts
12. Asbury Automotive Group, Inc. (NYSE:ABG)
Average Analyst Price Target Upside: 12.22%
Average Analyst Price Target: $261.67
Asbury Automotive Group, Inc. (NYSE:ABG) is an American company that operates auto dealerships across the US and is one of the country’s largest auto retailers. It is headquartered in Atlanta, Georgia.
In the third quarter, 30 hedge funds had a stake in Asbury Automotive Group, Inc. (NYSE:ABG), up from 27 in the previous quarter. Abrams Capital Management held the largest stake in the company, with 2.11 million shares worth nearly $485.112 million.
On December 11, Asbury Automotive Group, Inc. (NYSE:ABG) completed the acquisition of one of the largest privately-owned dealership groups in the US, Jim Koons Automotive Companies. The acquisition adds 20 dealerships, 29 franchises, 6 collision centers, and one of the highest volume Toyota dealerships in the US to Asbury Automotive Group, Inc. (NYSE:ABG)’s portfolio.
Asbury Automotive Group, Inc. (NYSE:ABG) is one of the most promising car stocks according to analysts, along with Li Auto Inc. (NASDAQ:LI), Driven Brands Holdings Inc. (NASDAQ:DRVN), and OPENLANE, Inc. (NYSE:KAR).
In its Q3 investor letter, Black Bear Value Partners, an investment management firm, made the following comments about Asbury Automotive Group, Inc. (NYSE:ABG):
“Asbury Group operates auto dealerships across the United States. While much attention is paid to the number of cars sold, the strength of the model comes from the back of the house in parts and services where more than 50% of the profits come from. We are exiting a period of high margins on new and used car sales. Shortages of inventory have allowed dealers to make record profits when selling a car. As inventories normalize and interest rates rise, I fully expect the dealers to make less profit (called the GPU) when selling a car. Car prices cannot go up ad-infinitum and at some point, there will be buyer pushback. The lower operating costs of the business are not appreciated by the market. They are appreciated by us and the management teams as most dealers, including ABG, have been buying in lots of stock with their free-cash flow.”
11. Rivian Automotive, Inc. (NASDAQ:RIVN)
Average Analyst Price Target Upside: 12.26%
Average Analyst Price Target: $25.63
Rivian Automotive, Inc. (NASDAQ:RIVN) is a California-based electric vehicle developer and manufacturer that produces sport utility vehicles (SUVs), vans, and trucks and provides related accessories, a fleet management subscription platform, and more.
On December 14, Rivian Automotive, Inc. (NASDAQ:RIVN)’s stock was up around 4% during morning trading after announcing that AT&T Inc. (NYSE:T) will purchase its commercial van and R1 truck for its pilot program.
Rivian Automotive, Inc. (NASDAQ:RIVN) was covered by 21 Wall Street analysts over the last three months, and 13 kept a Buy rating on the stock. The average price target of $25.63 represented an upside of 12.26% as of the December 15 market close.
Baron Funds mentioned Rivian Automotive, Inc. (NASDAQ:RIVN) in its third quarter 2023 investor letter. Here is what it said:
“Shares of Rivian Automotive, Inc., a U.S.-based electric vehicle manufacturer, continued their volatile trading, and after declining during the first half of 2023, rose 45.7% during the third quarter. Rivian’s unit economics are improving as a result of several factors: i) the company’s production rate is increasing, which enables it to better absorb fixed costs; ii) Rivian is ramping-up the usage of more price effective technologies, such as LFP batteries and its in-house developed motor, Enduro; and iii) the company is benefiting from renegotiated supplier agreements, as its scale and purchasing power have significantly increased over the last few years. Management expects continued progress in profitability ahead as Rivian further scales production. We remain shareholders and believe that the release of Rivian’s new smaller SUV dubbed R2, which is planned for early 2024, would enable the company to compete in the higher volume SUV segment, and significantly expand its addressable market. On the liquidity front, we expect the company to raise additional funds to support its longer-term business plans.”
10. VinFast Auto Ltd. (NASDAQ:VFS)
Average Analyst Price Target Upside: 20.56%
Average Analyst Price Target: $9.50
VinFast Auto Ltd. (NASDAQ:VFS) is a Vietnam-based auto manufacturer that produces electric cars, electric scooters, and electric transit buses. The company is owned by the Vietnamese giant Vingroup Joint Stock Company (VIC.VN).
On November 21, Wedbush initiated coverage of VinFast Auto Ltd. (NASDAQ:VFS)’s stock with an Outperform rating and a $12 price target. The firm said that it has witnessed the “impressive VinFast operations in Vietnam firsthand and came away extremely impressed with its EV footprint.” Furthermore, it is confident about the company’s position to roll out a strong product portfolio worldwide for electric transportation, all the while cultivating a “strong ecosystem to generate profitable growth over the coming years.”
On November 10, VinFast Auto Ltd. (NASDAQ:VFS) announced its U.S. expansion plan, including 125 locations for its distribution network. The company mentioned that it has over 70 dealer applications already.
According to Insider Monkey’s database, which tracks 910 elite hedge funds, 8 funds had investments in VinFast Auto Ltd. (NASDAQ:VFS)’s stock in the third quarter at a combined stake value of $2.74 million.
9. AutoNation, Inc. (NYSE:AN)
Average Analyst Price Target Upside: 23.57%
Average Analyst Price Target: $182.40
AutoNation, Inc. (NYSE:AN) is a Florida-based company that provides pre-owned and new automobiles through its 300 locations in the U.S.
On November 14, AutoNation, Inc. (NYSE:AN) announced its new micro lease program called AutoNation Mobility. Apart from the micro leases, the program is said to include maintenance and roadside assistance and options to prolong the data of leasing or buying the vehicle at term-end.
In the last three months, 5 Wall Street analysts covered AutoNation, Inc. (NYSE:AN), and 3 maintained a Buy rating on the stock. The average price target of $182.40 had an upside of 23.57% as of the December 15 market close. AutoNation, Inc. (NYSE:AN) is one of the most promising stocks, according to analysts.
AutoNation, Inc. (NYSE:AN) was mentioned in Bonhoeffer Capital Management’s first quarter 2023 investor letter. Here is what it said:
“AutoNation has followed an organic growth and buyback strategy versus a consolidation strategy. All of the firms have had a reduction in PE over the last 10 years. The question is: will these historical trends continue? There is a large TAM for continued consolidation, and given the PEs (6-8x earnings) today, buybacks will be accretive to all of these firms. I think the historical trends are intact and will continue into the future; thus, I am bullish on growth for the consolidation-focused automobile dealers.”
8. Group 1 Automotive, Inc. (NYSE:GPI)
Average Analyst Price Target Upside: 26.32%
Average Analyst Price Target: $373.33
Group 1 Automotive, Inc. (NYSE:GPI) is a Texas-based retailer of new and used cars and light trucks. The company has more than 100 locations across the U.S. and also provides its products in the United Kingdom and Brazil.
As of November 15, Group 1 Automotive, Inc. (NYSE:GPI) had repurchased 678,743 shares for $158.4 million or at an average price of $233.31. Moreover, the company had $157.7 million left under its ongoing share repurchase authorization program.
In the third quarter, 35 hedge funds were bullish on Group 1 Automotive, Inc. (NYSE:GPI)’s stock, up from 31 in the previous quarter. The most prominent investor in the company was Anthony Bozza’s Lakewood Capital Management, with 324,726 shares worth $87.257 million.
Bonhoeffer Capital Management commented on Group 1 Automotive, Inc. (NYSE:GPI) in its first quarter 2023 investor letter. Here is what it said:
“Group 1 has followed a combination of consolidation and buybacks. All of the firms have had a reduction in PE over the last 10 years. The question is: will these historical trends continue? There is a large TAM for continued consolidation, and given the PEs (6-8x earnings) today, buybacks will be accretive to all of these firms. I think the historical trends are intact and will continue into the future; thus, I am bullish on growth for the consolidation-focused automobile dealers.”
7. General Motors Company (NYSE:GM)
Average Analyst Price Target Upside: 28.49%
Average Analyst Price Target: $45.91
General Motors Company (NYSE:GM) is one of the world’s largest auto manufacturing companies that builds and sells cars, SUVs, crossovers trucks, and automobile parts, as well as provides automotive financing services.
On November 29, General Motors Company (NYSE:GM) announced a 33% raise to its 2024 quarterly dividend to $0.12 per share. The company also announced an accelerated share repurchase program of $10 billion.
On November 30, General Motors Company (NYSE:GM) announced that its subsidiary, GM Defense LLC, is the recipient of a 10-year Indefinite Delivery Indefinite Quantity (IDIQ) full-rate production contract from the U.S. Department of State. Under the award, the company will be delivering its original equipment manufacturer integrated HD SUVs with a ceiling value of $300 million.
Patient Capital Management mentioned General Motors Company (NYSE:GM) in its second-quarter 2023 investor letter. Here is what it said:
“We like other names mostly ignored by the market for similar reasons. Names like Expedia (EXPE), General Motors Company (NYSE:GM), and Delta Air Lines. These companies have strong returns on capital (14%+), good competitive positions, cheap valuations (all double-digit free cash flow yields), and are returning capital to shareholders. We trust the managements to take advantage of their depressed stock prices and create long-term shareholder value.”
6. XPeng Inc. (NYSE:XPEV)
Average Analyst Price Target Upside: 28.89%
Average Analyst Price Target: $18.65
XPeng Inc. (NYSE:XPEV), or Guangzhou Xiaopeng Motors Technology Co Ltd., is a Chinese company that builds and sells smart electric vehicles (EVs).
Out of the 7 Wall Street analysts that covered XPeng Inc. (NYSE:XPEV) in the last three months, 5 kept a Buy rating on the stock. As of the December 15 market close, the average price target of $18.65 represented an upside of 28.89%.
On December 1, XPeng Inc. (NYSE:XPEV) announced that its November deliveries rose by 245% YoY to 20,041 smart EVs. It was the second straight month of monthly deliveries topping the 20,000 unit mark.
According to Insider Monkey’s database, 13 hedge funds held a stake in XPeng Inc. (NYSE:XPEV)’s stock in the third quarter. D E Shaw was the biggest stakeholder in the company and increased its stake by 212% to 4.56 million shares worth $83.788 million.
Li Auto Inc. (NASDAQ:LI), Driven Brands Holdings Inc. (NASDAQ:DRVN), and OPENLANE, Inc. (NYSE:KAR) are some of the most promising car stocks according to analysts besides XPeng Inc. (NYSE:XPEV).
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Disclosure. None. 12 Most Promising Car Stocks According to Analysts is originally published on Insider Monkey.
