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The US auto industry is on a path of major transformation, characterized by rapidly changing customer behavior and the adoption of vehicles of choice. For car companies, 2022 is one of the most difficult years, both in terms of sales and profits, with supply chain disruptions and inventory issues affecting deliveries. The situation is unlikely to change much this year, as economic uncertainty and rising interest rates add to existing problems.
On the positive side, leading auto stocks have hit historic lows and become more affordable, bringing enthusiasm to potential investors. Given the high demand situation – fueled by tax credits – carmakers will recover their lost value in the long run even if the supply problem eases and production costs ease. EV players in particular will benefit from the growing appetite for battery-powered vehicles. That said, the future of the industry will depend on the direction of the economy – fears of a recession will force companies to be cautious in their pricing strategies.
Top Automakers
After recovering from the downturn experienced in the initial phase of the pandemic, General Motors Co. (NYSE: GM ) has regained some of its sales momentum and is approaching last year’s pre-COVID levels. Although the quarterly figures improved, compared to the previous year’s weak data, the overall performance remained below the long-term average. In the third quarter, GM North America’s core segment grew 68% year-over-year, pushing adjusted earnings to $2.25 per share. According to the market outlook, the uptrend has continued in the last month of fiscal 2022, the results of which are expected to come out at the end of January.
Ford Motor Company Q3 2022 Earnings Call Transcript
GM stocks peaked around twelve months ago, after rebounding from multi-year lows, but reversed most of the gains since then. The stock is about 40% lower than last year, which can be seen as a safe entry point for long-term investors. The next few weeks will be a good time to invest as GM continues to make gains, a trend that should continue beyond the announcement.
Ford Motor District
A similar trend was seen in the performance of rival automaker Ford Motor Company (NYSE: F ), which kept sales steady last year, with quarterly numbers beating estimates most of the time. But that didn’t fully translate into profits — earnings, excluding special items, fell 41% year over year to $0.30 per share in the third quarter while the top line grew 10%. Anticipating an improvement in margin performance, analysts expect earnings to more than double in the fourth quarter, helped by revenue growth of 15%.
Ford’s stock starts 2023 about 50% below its value entering 2022. But it’s still better compared to the weak performance of recent years. The stock is trading slightly below its long-term average, but it has what it takes to increase shareholder value when market conditions improve.
EV Titan
Meanwhile, it’s a slightly different scenario at Tesla Inc. (NASDAQ: TSLA ), the EV giant that continues to take market share from traditional automakers. Investors approach the stock from a different perspective, considering the company’s unique portfolio that sets it apart from fossil fuel-powered vehicle manufacturers.
Tesla has mostly remained resistant to outside winds and is constantly expanding its portfolio and geographic footprint. In the last quarter of September 2022, Tesla’s profit and loss increased to a record high. Interestingly, the top line missed expectations, suggesting that market watchers have higher expectations for the company. The results benefited from vehicle deliveries and price increases.
Ford: A look at how automakers are looking at some of the major changes in the industry
Analysts’ positive outlook suggests that Tesla has the potential to set a new record in terms of monthly financial performance. Meanwhile, the dismal performance of stocks weighed on investor sentiment. Over the past six months, Tesla’s market price has more than halved, making the stock affordable. A key factor affecting the stock is the company’s delivery numbers – weak Q4 numbers led to a sell-off earlier in the year.
The good news is that the stock is about to return to last year’s highs, more than doubling its value. For those looking to add TSLA to their portfolio, they have a rare opportunity to do so.
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