The auto industry has been affected by macroeconomic challenges, chip shortages, and supply chain disruptions. Moreover, high inflation has put pressure on prospective car buyers’ pockets, and rising interest rates made borrowing costly. U.S. new vehicle sales declined 4% sequentially in November.
Despite the near-term uncertainties, the motor vehicle industry is expected to witness growth driven by a rise in consumer spending and the rapid switch to electric vehicles (EVs). Also, the CHIPS and Science Act is expected to boost the manufacturing capabilities of automakers by helping them rely less on foreign chip supplies.
According to a Mordor Intelligence report, the North American Automotive Market is expected to grow at a 6.6% CAGR by 2027.
Given these factors, investing in fundamentally strong motor vehicle stocks Stellantis N.V. and (STLA), Honda Motor Co., Ltd. (HMC) could be wise. On the other hand, Canoo Inc. (GOEV) and Mullen Automotive, Inc. (MULN) could be best avoided now due to their weak fundamentals and poor growth prospects.
Stocks to Buy:
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, Netherlands, STLA engages in the design, engineering, manufacturing, distribution, and sale of automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide. The company offers its products under the brand names such as Abarth, Alfa Romeo, Chrysler, Citroën, DS, and Dodge, among others.
On November 17, 2022, STLA announced the agreement to acquire aiMotive. This acquisition enhances STLA’s artificial intelligence and autonomous driving core technology, expands its global talent pool, and boosts the mid-term development of the all-new STLA AutoDrive platform. Yves Bonnefont, STLA’s Chief Software Officer, said, “aiMotive’s class-leading expertise and startup spirit will accelerate our journey to deliver our Dare Forward 2030 goals.”
For the fiscal third quarter ended June 30, 2022, STLA’s net revenues gained 29.3% year-over-year to €42.10 billion ($44.31 billion). Its consolidated shipments increased 13.3% year-over-year to 1.28 million units.
Analysts expect STLA’s revenue for the quarter ended September 30, 2022, to increase 4.8% year-over-year to $39.92 billion. Its EPS for fiscal 2022 is expected to increase 2.5% year-over-year to $5.77. Over the past three months, the stock has gained 13.5% to close the last trading session at $14.84.
STLA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Auto & Vehicle Manufacturers industry, it is ranked #8 out of 61 stocks. It has an A grade for Value and a B for Stability and Sentiment.
We have also given STLA grades for Growth, Momentum, and Quality. Get all STLA ratings here.
Honda Motor Co., Ltd. (HMC)
Headquartered in Tokyo, Japan, HMC develops, manufactures, and distributes motorcycles, automobiles, power products, and other products in Japan, North America, Europe, Asia, and internationally. It operates through four segments: Motorcycle Business, Automobile Business, Financial Services Business, and Life Creation and Other Businesses.
HMC’s sales revenue for the second quarter ended September 30, 2022, increased 25% year-over-year to ¥4.26 trillion ($31.15 billion). The company’s operating profit increased 16.2% year-over-year to ¥231.24 billion ($1.69 billion). Its profit for the period attributable to owners of the parent increased 13.6% year-over-year to ¥189.30 billion ($1.38 billion). Additionally, its EPS attributable to owners of the parent increased 14.8% from the prior-year period to ¥110.85.
Analysts expect HMC’s revenue for the quarter ending December 31, 2022, to increase 6% year-over-year to $33.86 billion. Its EPS for fiscal 2024 is expected to increase 24.6% year-over-year to $3.02. The stock has gained 0.8% over the past month to close the last trading session at $23.89.
It is no surprise that HMC has an overall rating of A, translating to a Strong Buy in our proprietary rating system. It is ranked #5 in the same industry. In addition, it has an A grade for Value and a B for Stability and Quality.
To see HMC’s rating for Growth, Momentum, and Sentiment, click here.
Stocks to Avoid:
Canoo Inc. (GOEV)
GOEV is a mobility technology company that designs, engineers, develops, and manufactures electric vehicles for commercial and consumer markets. The company offers lifestyle delivery vehicles, multi-purpose delivery vehicles, and pickups, catering to small businesses, independent contractors, tradespeople, utilities, and service technicians.
GOEV’s losses from operations widened 2.2% year-over-year to $109.34 million for the third fiscal quarter ended September 30, 2022. The company’s net loss widened 45.5% year-over-year to $117.71 million. Additionally, its net loss per share widened 22.9% year-over-year to $0.43, and adjusted EBITDA loss narrowed 5.8% year-over-year to $80.83 million.
GOEV’s EPS for the quarter ending December 31, 2022, is expected to remain negative. The stock has fallen 82.6% year-to-date to close the last trading session at $1.34.
GOEV’s bleak prospects are reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. It is ranked #50 in the same industry. It has an F grade for Value, Stability, and Quality.
We have also given GOEV a grade for Growth, Momentum, and Sentiment. Get all GOEV ratings here.
Mullen Automotive, Inc. (MULN)
MULN is an electric vehicle company that manufactures and distributes electric vehicles. It also operates CarHub, a digital platform that leverages AI to offer an interactive solution for buying, selling, and owning a car, and provides battery technology and emergency point-of-care solutions.
For the fiscal quarter ended June 30, 2022, MULN’s loss from operations widened 184.5% year-over-year to $18.22 million. The company’s net loss widened 289.9% year-over-year to $59.47 million. Moreover, its net loss per share narrowed 94.5% from the prior-year quarter to $0.16.
The stock has fallen 96.4% year-to-date to close the last trading session at $0.19.
MULN’s grim outlook is reflected in its POWR Ratings. The company's overall F rating translates to a Strong Sell in our proprietary rating system. It is ranked #57 in the Auto & Vehicle Manufacturers industry. In addition, it has an F grade for Value and Stability and a D for Sentiment and Quality.
Click here to see the additional ratings of MULN for Growth and Momentum.
STLA shares were trading at $14.49 per share on Friday morning, down $0.35 (-2.36%). Year-to-date, STLA has declined -22.76%, versus a -15.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
2 Motor Vehicle Stocks to Buy in December and 2 to Avoid StockNews.com
