Tesla & Other Automotive Stocks to Buy Ahead of November
Automakers in the United States largely posted disappointing third-quarter sales numbers. In fact, new vehicle sales in the United States tanked nearly 26% in September, citing an economic times article. The global shortage of chips wreaked havoc on the automotive industry, with major carmakers blaming the crisis for discouraging performance in the third quarter. Citing a CNBC article, per AlixPartners, chip shortage is at present projected to cost the global automotive industry $210 billion in revenues this year.
So, what led to the chip crisis? During the coronavirus-led pandemic, especially last year, several auto plants were shut down. Thus, chip makers shifted the bulk of their production to fulfill the rising demand for laptops, tablets, and gaming devices amid the pandemic-led lockdown period. That resulted in an acute shortage of automotive-grade chips, something that may not get resolved anytime soon. But despite such a doldrum, an astute investor shouldn’t completely ignore automotive stocks, especially if you keep an eye on Tesla, Inc TSLA! Wall Street is, now, loving the electric carmaker more than ever. After all, it became the second-fastest company to see its valuation hit the coveted $1-trillion market capitalization on Oct 25.
While Tesla became the fifth company in U.S. history to be worth more than $1 trillion, its market capitalization at present has soared past the combined net worth of the next nine largest carmakers. Its close competitors, including Toyota Motor Corporation TM and General Motors Company GM, are merely worth around $237 billion and $84 billion, respectively. Tesla’s shares, by the way, have already jumped nearly 30% so far this month and are mostly triggered by news that Hertz would purchase 100,000 of the company’s Model 3 fleet. What’s more, Tesla is one of the few companies that came out with encouraging third-quarter results amid the global chip shortage crisis and several other supply-chain disruptions. This was possible because of the continuous demand for its Model Y vehicle.
Moreover, Tesla is undoubtedly expected to do well in the near future, banking on the growing demand for electric vehicles (EVs). Several countries are now aiming to reduce carbon emissions. Thus, the requirement for EVs is soaring at the moment. After all, electrifying any vehicle leads to lesser carbon emissions. The EV market, in the meantime, is expected to get a push from President Biden’s expenditure plans. His government is likely to spend a whopping $174 billion to boost the EV market. In reality, the global EV market is likely to witness a CAGR of 22% to $700 billion from 2021 to 2026, per Facts and Factors, as mentioned in a globenewswire article.
All these for sure should be helpful for Tesla, which has played a significant role in transforming the EV market. Hence, it is prudent to invest in Tesla heading into the month of November. Tesla currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 16.8% over the past 60 days. The company’s shares are expected to climb 163.8% this year. For the next year, shares of Tesla are projected to gain 30.5%. Tesla, in fact, has outperformed the broader industry over the past year (+162.2% vs +75.2%). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, why only place your bets on Tesla? There is nothing wrong with being more adventurous and investing in other auto stocks positioned to advance in the near term. This way, you can double your returns. And why not? Anyhow, the broader auto industry will do well in the longer term, thanks to an improving U.S. economy, a low-interest-rate environment, and the possibility of chip shortages being addressed. Therefore, here are the obvious choices –
Nikola Corporation NKLA manufactures EVs. The company offers battery-electric and hydrogen fuel-cell electric vehicles. It also manufactures semi-trucks and powersports vehicles. Nikola currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has risen 2.2% over the past 60 days. For the next five-year period, shares of Nikola are projected to gain 30%.
Standard Motor Products, Inc. SMP is one of the leading manufacturers, distributors, and marketers of premium automotive replacement parts for engine management and temperature control systems. Standard Motor Products currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 5.7% over the past 60 days. The company’s shares are expected to increase 7.8% this year. For the next year, shares of Standard Motor Products are projected to gain 5.4%.
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Toyota Motor Corporation (TM) : Free Stock Analysis Report
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