The efforts by governments worldwide to achieve carbon neutrality and electromobility in the coming decades have been pushing auto manufacturers to focus on electric vehicles (EVs) over the past few years. However, a current semiconductor chip shortage badly affected the auto industry last year, forcing companies to halt production, leading to low inventory and a rise in car prices.
Popular auto manufacturer Ford Motor Company’s (F) launch of new electric vehicles helped it gain significant investor attention, as evidenced by its shares’ 150.2% gains over the past year. However, production cuts, the impact of the chip shortage, and cannibalization of its sales led to a significant decline in F’s U.S. sales in 2021. Though F is making considerable investments in its EV segment, rising battery and other input costs, and lower profits from its vehicle sales, could make it difficult for the company to meet the surging demand. Analysts expect F’s shares to suffer a 10.5% price decline in the near term.
Because government policy support and rising investments to ramp up production could slightly ease the semiconductor chip shortage this year, the industry is expected to rebound. As such, Wall Street Analysts believe fundamentally-strong auto manufacturers Daimler AG (DDAIF), General Motors Company (GM), Stellantis N.V. (STLA), and NIO Inc. (NIO) have the potential to outperform F in the upcoming months.
Daimler AG (DDAIF)
Headquartered in Germany, DDAIF is an automotive engineering company that develops, produces, and distributes cars, trucks, and vans. The company operates through Mercedes-Benz Cars; Daimler Trucks; Mercedes-Benz Vans; Daimler Buses; and Daimler Financial Services. It also sells related spare parts and accessories.
On Dec. 2, 2021, DDAIF approved more than €60 billion ($68.81 billion) in the Mercedes-Benz Business Plan for 2022 to 2026 to be focused on electrification, digitalization, and automated driving. Following the Daimler Truck spin-off, Mercedes-Benz will focus on profit and growth opportunities in the passenger car and vans businesses. It also expects that the use of standardized battery platforms and scalable vehicle architectures, together with advances in battery technology, will reduce the variable costs of vehicles. The company is looking forward to leading in electric drives and car software in the coming years.
DDAIF’s revenue for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased marginally year-over-year to €31.65 billion ($36.21 billion). The company’s gross profit came in at €6.71 billion ($7.68 billion), representing a 14% year-over-year improvement. Its operating profit was €2.88 billion ($3.29 billion) for the quarter, indicating a 15.1% rise from the prior-year period. DDAIF’s net profit were €2.47 billion ($2.83 billion), up 20.6% from the year-ago period. And its EPS increased 20.9% year-over-year to €2.31. The company had €25.36 billion ($29.01 billion) in cash and cash equivalents as of Sept. 30, 2021.
Analysts expect the company’s EPS to increase 234.3% year-over-year to $13.64 in its fiscal year 2021, ended Dec. 31, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters. The $200.90 billion consensus revenue estimate for the same fiscal year represents an 8.1% rise from the prior-year period.
The stock has gained 18.9% in price over the past year to close yesterday’s trading session at $84.22. Of 17 Wall Street analysts that have rated the stock, 14 rated it Buy, and three rated it Hold. The $105.27 average price target for the stock indicates a 25% upside potential.
General Motors Company (GM)
GM in Detroit, Mich., designs, manufactures, and sells cars, trucks, crossover vehicles, and related automobile parts to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments. It also offers vehicle protection, maintenance, satellite radio, and automotive financing services.
On Jan. 11, 2022, GM introduced CarBravo, which allows used-vehicle customers access to both the dealer and a national central stock of expansive GM and non-GM used vehicles. Through CarBravo and its new digital retail platform (DRP) GM is looking forward to delivering an omnichannel shopping experience and exclusive ownership benefits.
The company had $17.37 billion in cash and cash equivalents as of Sept. 30, 2021. The $6.78 consensus EPS estimate for the fiscal year 2021 ended December 31, 2021, represents a 38.4% rise from the prior-year period. It surpassed the consensus EPS estimates in three of the trailing four quarters. Analysts expect GM’s revenue to rise 4.2% year-over-year to $127.63 billion in the same fiscal year.
GM has gained 27.6% in price over the past year and ended yesterday’s trading session at $61.03. Of 16 Wall Street analysts that have rated the stock, 13 have rated it a Buy, while three rated it Hold. Analysts expect the stock’s price to hit $76 in the near term, representing a 24.5% upside potential.
Stellantis N.V. (STLA)
Based in the Netherlands, STLA designs, manufactures, and sells passenger vehicles, pickup trucks, SUVs, and light commercial vehicles worldwide. The company also produces metallurgical products and production systems for the automobile industry, and provides retail and dealer financing, leasing, and rental services. It sells its products directly, as well as through distributors and dealers.
On Jan. 5, 2022, STLA announced a series of global, multi-year agreements with Amazon.com, Inc. (AMZN) that will deploy AMZN’s technology and software expertise across the STLA organization and help accelerate its shift to becoming a sustainable mobility tech company. Together, the companies will create a suite of software-based products and services for STLA’s new digital cabin platform, STLA SmartCockpit, starting in 2024, and deliver an enhanced digital customer experience to customers.
For its fiscal 2021 third quarter, ended Sept. 30, 2021, STLA’s net revenues from external customers increased 171.8% year-over-year to €32.55 billion ($37.34 billion).
Analysts expect the company’s revenue to be $168.75 billion for its fiscal year 2021, ended Dec. 31, 2021, representing a 4.1% rise from the prior-year period. It surpassed Street’s EPS estimates in each of the trailing four quarters.
STLA has gained 18.1% in price over the past year to close yesterday’s trading session at $21.12. Of eight Wall Street analysts rating the stock, six have rated it a Buy, and one rated it Hold. STLA’s $27.14 average price target represents a 28.5% upside potential.
NIO Inc. (NIO)
Known as the ‘Tesla of China,’ Jiading, China-based NIO designs, manufactures, and sells smart and connected EVs that are integrated with next-generation technologies and artificial intelligence. The company’s products include its EP9 supercar and ES8 7-seater SUV. It provides home charging, power express valet service, and other power solutions that include access to public charging, access to power mobile charging trucks, and battery swapping.
NIO delivered 10,489 vehicles in December 2021 and 25,034 vehicles in the fourth quarter of 2021, increasing by 49.7% and 44.3%, respectively, from their prior-year period values. Also, the company delivered 91,429 vehicles in 2021 in total, representing a 109.1% rise from the year-ago period.
On Dec. 18, 2021, NIO launched the ET5, a mid-size premium smart electric sedan, and expects to begin its deliveries in September 2022. The company is looking forward to witnessing high demand after its launch.
For its fiscal 2021 third quarter, ended Sept. 30, 2021, NIO’s total revenues increased 116.6% year-over-year to $1.52 billion. The company had $3.35 billion in cash and cash equivalents as of Sept. 30, 2021.
A $5.62 billion consensus revenue estimate for its fiscal year 2021, ended Dec. 31, 2021, represents a 120.1% rise from the prior-year period. Over the past year, NIO’s shares have declined 48.9% in price to close yesterday’s trading session at $31.68. Eight of nine Wall Street analysts rating the stock have rated it a Buy, and one rated it Hold. The $59.96 average price target represents an 89.3% upside potential.
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F shares were trading at $25.65 per share on Thursday morning, up $1.18 (+4.82%). Year-to-date, F has gained 23.50%, versus a -0.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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