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Investors have quite the opportunity to get in on the growth of the auto industry as electric vehicle innovation continues. Specifically, the Zacks Automotive – Domestic Industry has posted a staggering total return of 240% over the last five years. In comparison, the S&P 500 return is 73% in that same time span.
The Automotive – Domestic Industry ranks in the top 36% of over 250 Zacks Industries. Out of this group, here are three stocks investors should consider buying.
General Motors ((GM - Free Report) ), Ford ((F - Free Report) ), and Tesla ((TSLA - Free Report) ) are worthy portfolio additions. All three stocks are transforming the future of the automobile industry with EVs, hybrid cars, and more.
With the Electric Vehicle market currently valued between $200-500 billion, and a CAGR (Compound Annual Growth Rate) close to 20% or higher, the evolution of the auto industry is just beginning.
Tesla is without a doubt the industry leader in EV production and it has the market cap to prove it. Tesla’s market cap of $870 billion blows away GM’s $57 billion and Ford’s $62 billion. Tesla is the market leader in battery powered electric cars sales in the U.S., commanding 70% of the market share.
Tesla stock is down 23% year to date compared to the S&P 500’s 17% drop. This decline may be a healthy correction for the stock, as TSLA is up 1,060% over the last five years. Tesla has drastically outperformed its auto peers and the benchmark.
Image Source: Zacks Investment Research
The somewhat prolonged selloff this year may have created opportunities for investors. Also, TSLA recently completed a 3-for-1 stock split. Shares are currently trading around $270 a share. This is far more affordable than previous levels that saw the stock routinely push towards the $1,000 a share mark. TSLA had a 5-for-1 split in 2020.
At current levels, TSLA has a forward P/E of 69X. The industry average P/E is 11X. But investors are willing to pay up for Tesla because of its growth prospects. Tesla’s Forward P/E at the moment is also a lot lower than the high of 307X it saw earlier in the year and the median around 129X.
Tesla’s earnings are expected to climb 75% at $3.97 a share in 2022, based on Zacks estimates. Fiscal 2023 calls for another 28% earnings growth. Top line growth is expected as well, with sales set to jump 58% this year and another 41% in FY23 to $120.58 billion.
TSLA currently sports a Zacks Rank #2 (Buy) with estimate revisions on the rise.
Before there was a Tesla, General Motors was one of the gems of the auto industry. GM played a dominant role in the auto industry for much of the last century.
General Motors’ performance has been lackluster this year, with the stock down 35% to underperform the S&P 500. Over the last five years, GM is up a modest 15%.
GM sales have been solid with its U.S. market share hitting 14.4% of total industry sales in 2021. Despite massive sales numbers, the company has often missed sales expectations. A lot is expected of GM, even when beating earnings expectations, the misses on the top line are part of the reason why investors have been selling the stock. Prior to its Q2 earnings miss, GM had beat earnings expectations for 15 straight quarters.
Image Source: Zacks Investment Research
GM has forward P/E of 5.6X, well below its industry average of 11X. Despite its low P/E, investors are cautious of GM losing more of its footing in the auto industry. Much of the worry is attributed to Tesla taking market share, and the increasing competition from other companies competing in EV evolution.
With that being said, sales are projected to be up 58% for the current quarter at $42.31 billion. Fiscal 2022 sales are projected to climb 21% and another 6% in FY23 at $164.23 billion. Despite the sales growth, earnings are expected to be down 4% this year and another 3% in FY23 at $6.59 per share. For GM, continuing to grow market share will stem from its ability to innovate in the electric vehicle space. General Motors does have an impressive future pipeline of EV vehicles, which includes the Electric Hummer.
GM currently lands a Zacks Rank #3 (Hold) and has an overall “A” VGM score. And GM recently brought back its dividend, creating more value for investors. GM’s reinstated dividend has a current yield of 0.94%, at $0.36 a share.
Ford Motors may be not be a “dark horse” on the list, as it has become the second best-selling EV brand in the U.S. behind Tesla. Ford stock’s low price per share of under $15 will certainly be attractive to some investors.
Ford is a thoroughbred in designing and manufacturing cars, trucks, and SUVs. Ford’s F-150 had been the best-selling vehicle for 40 straight years, and the industry’s top selling truck for 45 consecutive years.
Ford has also made a push into the electric vehicle market. Similar to General Motors, much of its future stock appreciation may hinge on taking market share in the EV space.
Ford is down 28% this year, after hitting multi-year highs in January. Ford has underperformed the S&P 500 YTD and in the last five years, but has made some nice strides in the right direction.
Image Source: Zacks Investment Research
Most recently, Ford beat Q2 earnings expectations by 58% at $0.68 a share. Ford had a nice streak of blasting earnings expectations, starting in Q2 2020 through Q3 2021, which helped propel the stock to multi-year highs, as seen in the chart above.
Fiscal 2022 earnings are projected to be up 31%, with a small 0.8% drop expected for FY23. Top line growth is expected to be up 16% this year and another 3% in FY23 at $152.12 billion.
Ford has a Zacks Rank #3 (Hold) right now, the company is headed in the right direction with an impressive EV lineup that will include the F–150 Lightning and Mustang Mach–E.
Ford’s President and CEO Jim Farley recently stated the company’s anticipated growth rate in EVs through 2026 is more than twice what they expect for the global EV industry in total. If this even comes close to fruition, Ford will certainly be taking much more market share as sales would seemingly soar considering the future growth the EV market still has to offer.
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3 Auto Stocks to Buy for EV Growth
Investors have quite the opportunity to get in on the growth of the auto industry as electric vehicle innovation continues. Specifically, the Zacks Automotive – Domestic Industry has posted a staggering total return of 240% over the last five years. In comparison, the S&P 500 return is 73% in that same time span.
The Automotive – Domestic Industry ranks in the top 36% of over 250 Zacks Industries. Out of this group, here are three stocks investors should consider buying.
General Motors ((GM - Free Report) ), Ford ((F - Free Report) ), and Tesla ((TSLA - Free Report) ) are worthy portfolio additions. All three stocks are transforming the future of the automobile industry with EVs, hybrid cars, and more.
With the Electric Vehicle market currently valued between $200-500 billion, and a CAGR (Compound Annual Growth Rate) close to 20% or higher, the evolution of the auto industry is just beginning.
Tesla (TSLA - Free Report)
Tesla is without a doubt the industry leader in EV production and it has the market cap to prove it. Tesla’s market cap of $870 billion blows away GM’s $57 billion and Ford’s $62 billion. Tesla is the market leader in battery powered electric cars sales in the U.S., commanding 70% of the market share.
Tesla stock is down 23% year to date compared to the S&P 500’s 17% drop. This decline may be a healthy correction for the stock, as TSLA is up 1,060% over the last five years. Tesla has drastically outperformed its auto peers and the benchmark.
Image Source: Zacks Investment Research
The somewhat prolonged selloff this year may have created opportunities for investors. Also, TSLA recently completed a 3-for-1 stock split. Shares are currently trading around $270 a share. This is far more affordable than previous levels that saw the stock routinely push towards the $1,000 a share mark. TSLA had a 5-for-1 split in 2020.
At current levels, TSLA has a forward P/E of 69X. The industry average P/E is 11X. But investors are willing to pay up for Tesla because of its growth prospects. Tesla’s Forward P/E at the moment is also a lot lower than the high of 307X it saw earlier in the year and the median around 129X.
Tesla’s earnings are expected to climb 75% at $3.97 a share in 2022, based on Zacks estimates. Fiscal 2023 calls for another 28% earnings growth. Top line growth is expected as well, with sales set to jump 58% this year and another 41% in FY23 to $120.58 billion.
TSLA currently sports a Zacks Rank #2 (Buy) with estimate revisions on the rise.
General Motors (GM - Free Report)
Before there was a Tesla, General Motors was one of the gems of the auto industry. GM played a dominant role in the auto industry for much of the last century.
General Motors’ performance has been lackluster this year, with the stock down 35% to underperform the S&P 500. Over the last five years, GM is up a modest 15%.
GM sales have been solid with its U.S. market share hitting 14.4% of total industry sales in 2021. Despite massive sales numbers, the company has often missed sales expectations. A lot is expected of GM, even when beating earnings expectations, the misses on the top line are part of the reason why investors have been selling the stock. Prior to its Q2 earnings miss, GM had beat earnings expectations for 15 straight quarters.
Image Source: Zacks Investment Research
GM has forward P/E of 5.6X, well below its industry average of 11X. Despite its low P/E, investors are cautious of GM losing more of its footing in the auto industry. Much of the worry is attributed to Tesla taking market share, and the increasing competition from other companies competing in EV evolution.
With that being said, sales are projected to be up 58% for the current quarter at $42.31 billion. Fiscal 2022 sales are projected to climb 21% and another 6% in FY23 at $164.23 billion. Despite the sales growth, earnings are expected to be down 4% this year and another 3% in FY23 at $6.59 per share. For GM, continuing to grow market share will stem from its ability to innovate in the electric vehicle space. General Motors does have an impressive future pipeline of EV vehicles, which includes the Electric Hummer.
GM currently lands a Zacks Rank #3 (Hold) and has an overall “A” VGM score. And GM recently brought back its dividend, creating more value for investors. GM’s reinstated dividend has a current yield of 0.94%, at $0.36 a share.
Ford (F - Free Report)
Ford Motors may be not be a “dark horse” on the list, as it has become the second best-selling EV brand in the U.S. behind Tesla. Ford stock’s low price per share of under $15 will certainly be attractive to some investors.
Ford is a thoroughbred in designing and manufacturing cars, trucks, and SUVs. Ford’s F-150 had been the best-selling vehicle for 40 straight years, and the industry’s top selling truck for 45 consecutive years.
Ford has also made a push into the electric vehicle market. Similar to General Motors, much of its future stock appreciation may hinge on taking market share in the EV space.
Ford is down 28% this year, after hitting multi-year highs in January. Ford has underperformed the S&P 500 YTD and in the last five years, but has made some nice strides in the right direction.
Image Source: Zacks Investment Research
Most recently, Ford beat Q2 earnings expectations by 58% at $0.68 a share. Ford had a nice streak of blasting earnings expectations, starting in Q2 2020 through Q3 2021, which helped propel the stock to multi-year highs, as seen in the chart above.
Fiscal 2022 earnings are projected to be up 31%, with a small 0.8% drop expected for FY23. Top line growth is expected to be up 16% this year and another 3% in FY23 at $152.12 billion.
Ford has a Zacks Rank #3 (Hold) right now, the company is headed in the right direction with an impressive EV lineup that will include the F–150 Lightning and Mustang Mach–E.
Ford’s President and CEO Jim Farley recently stated the company’s anticipated growth rate in EVs through 2026 is more than twice what they expect for the global EV industry in total. If this even comes close to fruition, Ford will certainly be taking much more market share as sales would seemingly soar considering the future growth the EV market still has to offer.