The auto industry has been under pressure this year due to several headwinds, such as supply chain disruptions, high prices of raw materials, and semiconductor shortages.

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 auto industry is expected to witness growth driven by a rise in consumer spending and the switch to electric vehicles (EVs). The CHIPS and Science Act is also 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 the uncertain macroeconomic factors, it could be wise to sell fundamentally weak auto stocks, such as Lucid Group, Inc. (LCID), Workhorse Group Inc. (WKHS), Mullen Automotive, Inc. (MULN), and Faraday Future Intelligent Electric Inc. (FFIE). 

On the other hand, to capitalize on the industry’s long-term growth prospects, it could be wise to buy Honda Motor Co., Ltd. (HMC) because of its strong fundamentals and promising growth prospects.

Stocks to Sell:

Lucid Group, Inc. (LCID)

LCID is a technology and automotive company that develops EV technologies. The company designs, engineers, and builds electric vehicles, EV powertrains, and battery systems.

For the fiscal third quarter ended September 30, 2022, LCID’s loss from operations widened 38.3% year-over-year to $687.52 million. Its net loss attributable to common stockholders widened 27.8% from the year-ago period to $670.25 million. In addition, its adjusted EBITDA loss widened 125.7% year-over-year to $552.90 million, while its net loss per share came in at $0.40.

LCID’s EPS for the quarter ending December 31, 2022, is expected to remain negative. The stock has fallen 74.2% year-to-date to close the last trading session at $9.83.

LCID’s grim outlook is reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It is ranked #59 out of 63 stocks within the D-rated Auto & Vehicle Manufacturers industry. It has an F grade for Value, Stability, Sentiment, and Quality.

Click here to see the additional ratings of LCID for Growth and Momentum.

Workhorse Group Inc. (WKHS)

WKHS is a technology company that designs, manufactures, and sells zero-emission commercial vehicles. It offers electric and range-extended medium-duty delivery trucks and HorseFly Unmanned Aerial System, a custom-designed purpose-built all-electric drone system. It also provides Metron, an air delivery application that tracks the performance of vehicles deployed.

WKHS’ loss from operations for the fiscal third quarter ended September 30, 2022, widened 91.5% year-over-year to $48.85 million. Its total operating expenses increased 205.5% year-over-year to $40.88 million. 

The company’s total liabilities for the same quarter increased 32.1% to $70.61 million, compared to $53.45 million for the fiscal year ended December 31, 2021. Moreover, its net loss per share of common stock came in at $0.22.

Analysts expect WKHS’ loss per share for the quarter ending December 31, 2022, to remain negative. The stock has fallen 46.8% year-to-date to close the last trading session at $2.32.

WKHS’ bleak prospects are reflected in its POWR Ratings. The company has an overall F rating, equating to a Strong Sell in our proprietary rating system. It is ranked #52 in the same industry. In addition, it has an F grade for Value, Stability, and Sentiment and a D for Quality.

In total, we rate WKHS on eight different levels. Beyond what we stated above, we have also given WKHS grades for Growth and Momentum. Get all WKHS 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 by 94.5% from the prior-year quarter to $0.16.

The stock has fallen 95.9% year-to-date to close the last trading session at $0.22.

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.

To see the additional ratings of MULN for Growth and Momentum, click here.

Faraday Future Intelligent Electric Inc. (FFIE)

FFIE engages in the design, development, manufacture, engineering, sale, and distribution of electric vehicles and related products in the United States and internationally. It aims to break the boundaries between the Internet, IT, creative, and auto industries with product and service offerings that integrate new energy, AI, Internet, and sharing models.

FFIE’s net cash used in operating activities for the nine months ended September 30, 2022, increased 49.3% year-over-year to $355.11 million. The company’s total assets decreased 40.4% year-over-year to $540.68 million, compared to $907.43 million for the fiscal year ended December 31, 2021. Its net loss came in at $103.38 million.

FFIE’s EPS for the quarter ending December 31, 2022, is expected to remain negative. The stock has fallen 94.2% year-to-date to close the last trading session at $0.31.

FFIE’s weak fundamentals are reflected in its POWR Ratings. The company has an overall F rating, which equates to a Strong Sell. Again, it is ranked #60 in the same industry. In addition, it has an F grade for Value, Stability, and Quality and a D for Sentiment.

Click here to see the additional ratings of FFIE for Growth and Momentum.

Stock to Buy:

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 ($31.30 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 ($1.39 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 3.7% year-over-year to $33.11 billion. Over the past month, the stock has gained 7.1% to close the last trading session at $24.60.

HMC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It also has an A grade for Value and a B for Stability and Quality. It is ranked #5 out of 63 stocks in the Auto & Vehicle Manufacturers industry.

We have also given HMC grades for Growth, Momentum, and Sentiment. Get all HMC ratings here.

HMC shares were trading at $24.12 per share on Friday afternoon, down $0.48 (-1.95%). Year-to-date, HMC has declined -12.84%, versus a -13.51% 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. More...

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