3 Auto Stocks to Buy Amid the EV Sector Blues
While electric vehicles may be the future of mobility and transportation, an old industry is gaining significant relevance, thus driving the case for auto stocks to buy. Further, this fresh dynamic might not fade anytime soon.
Fundamentally, one of the biggest challenges facing the EV sector is the ongoing price war. One could make the argument that certain enterprises are only trying to weed out the competition. But it also implies that the overall addressable market is simply not big enough for every player. Otherwise, why bother initiating a directive that hurts your own business?
Amid the malaise in the EV sector, the legacy automotive sector has looked surprisingly impressive. Since the EV carnage might not end soon, speculators should consider these auto stocks to buy.
Toyota (TM)
One of the elite auto stocks to buy, Toyota (NYSE:TM) has enjoyed an impressive year so far. While popular publicly traded EV companies are drowning in red ink, TM shares have printed a healthy double-digit percentage return. Over the next few years, it could continue delivering solid results for prospective investors thanks to its dominance in one critical category: hybrids.
As The Wall Street Journal pointed out earlier this year, Toyota forecasted a record $30.3 billion net profit for the fiscal year ending March. Again, that’s due to sales of hybrid vehicles. Here, Toyota is giving the customer exactly what it wants. A dependable and reliable combustion-powered platform that can deliver serious mileage before needing to fill up.
In some ways, it’s the best of both worlds, taking advantage of established infrastructure while delivering incredible efficiencies. Even better, while other automotive companies – particularly pure-play EV manufacturers – struggle for momentum, Toyota hybrids are flying off the showroom floors. TM is easily one of the best auto stocks to buy.
General Motors (GM)
While I’m not exactly a fan of domestic car companies, I love General Motors (NYSE:GM) as an investment. Right now, GM stock trades at a lowly trailing-year earnings multiple of 6.04X and an even more modest forward multiple of 4.91X. Further, shares trade at only 0.35X trailing-year revenue. Quite frankly, I think this is ridiculous but it also makes sense on paper.
You see, analysts are projecting earnings per share to reach $8.99 on sales of $175.85 billion in fiscal 2024. Last year, EPS was $7.68 on sales of $171.84 billion. So, Wall Street anticipates robust earnings expansion but very modest top-line growth. However, this assessment doesn’t seem to factor in General Motors’ diverse and exciting product portfolio.
Essentially, GM can meet almost any customer needs, from affordable SUVs to luxury sedans to top-of-the-line sports cars. And should the EV sector recover, it can more aggressively pivot there with its Ultium battery and EV platform.
Analysts peg GM a moderate buy with a $51.17 target, making it an enticing idea for auto stocks to buy.
AutoNation (AN)
While not a direct candidate for auto stocks to buy, AutoNation (NYSE:AN) should be on your radar. Per its public profile, AutoNation operates as an automotive retailer. It operates through three segments: Domestic, Import and Premium Luxury. With many people still priced out of EVs even with the sector-wide price war, dealerships – which primarily hold inventory of combustion-powered cars – could benefit.
Yes, AutoNation falls under the consumer cyclical space. Basically, you don’t really need to buy a personal vehicle, especially if you live in the east coast. However, move out west and the paradigm shifts rapidly. Our infrastructure is based on the automobile. Therefore, AutoNation could see increased demand, especially if workplace dynamics fully normalize.
Imagine if more companies force their employees back to the office. If that happens, commuting will inherently rise, forcing greater automotive usage. Now, you’re talking greater magnitudes of wear and tear. Sure, it’s a cynical argument. However, that may be one of the reasons why AN sports a moderate buy view with a $182.50 price target.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
