The COVID-19 pandemic-led restrictions wreaked havoc on the automotive industry last year as demand fell off a cliff. Global semiconductor supply constraints have also been negatively impacting the industry. However, according to Goldman Sachs’ (GS) chief Asia economist, the chip shortage should decline later this year as chip shipments improve and plants return to full working capacity. Huge government and private investments to boost semiconductor production should address the supply concern significantly in the coming months. This, along with the fast-paced economic reopening, should drive the automotive industry’s recovery.
Investors’ increasing interest in the automotive space is evident in the First Trust NASDAQ Global Auto Index Fund’s (CARZ) 10.1% returns over the past month versus the tech-heavy Nasdaq’s 1.6% gains. Also, traditional automakers might be in a more beneficial position than pure electric vehicle (EV) producers based on their broad portfolio of vehicles and market dominance.
Given the automotive industry’s promising recovery prospects, analysts are optimistic about the performance of NIO Inc. (NIO) and Ford Motor Company (F). Analysts’ views on these stocks have recently been upgraded. So, we think it could be wise to scoop up these stocks now.
NIO Inc. (NIO)
Headquartered in Shanghai, China, NIO designs, develops, manufactures, and sells smart electric vehicles (EVs). Its offerings include five-, six-, and seven-seater electric SUVs, and smart electric sedans. In addition, the company provides energy and service packages to its users and offers power solutions that include Power Home, which is a home charging product. Citi recently upgraded the stock from ‘Neutral’ to ‘Buy.’
On May 24, 2021, NIO announced that it had entered manufacturing agreements with Jianghuai Automobile Group Co., Ltd., and Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd., regarding the joint manufacture of its vehicles and related fee arrangements. These arrangements are expected to increase NIO’s manufacturing efficiency.
NIO’s vehicle deliveries increased 422.7% year-over-year to 20,060 for the first quarter, ended March 31, 2021. Its vehicle sales grew 489.8% year-over-year to $1.13 billion, while its total revenues increased 481.8% year-over-year to $1.22 billion. Also, its gross profit came in at $237.30 million, up 36.2% sequentially.
Analysts expect NIO’s EPS to increase 38.9% for the current quarter, ending June 30, 2021, and 33.3% for the quarter ending September 30, 2021. The company’s revenue is expected to increase 135.9% year-over-year to $1.30 billion in the current quarter. The stock has gained 629.7% over the past year to close yesterday’s trading session at $43.56.
Ford Motor Company (F)
As one of the prominent players in the automotive space, F designs, manufactures, markets, and servicing a range of Ford trucks, cars, EVs, and Lincoln luxury vehicles worldwide. It operates through three segments: automotive; mobility; and Ford Credit. JPMorgan analyst Ryan Brinkman has lifted his price target on F by $2 to $18 per share, while holding his ‘overweight’ rating in place.
F unveiled its 2022 F-150 Lightning Pro on May 24, 2021. The vehicle is the newest member of its growing work-ready lineup. With a built-in high-tech electric platform and innovative features, F could generate increasing demand for the product from its commercial consumers.
F’s total revenues increased 5.5% year-over-year to $36.23 million for the first quarter, ended March 31, 2021. Its operating income came in at $2.46 billion compared to a $1.56 billion operating loss in the prior-year period. Its net income was $3.26 billion versus a $1.99 billion net loss in the year-ago period. Also, its EPS came in at $0.81 compared to a $0.50 loss per share in the prior-year period.
The company’s EPS is expected to be $1.02 in 2021, which represents a 148.8% year-over-year increase. F surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect F’s revenue to increase 48.3% year-over-year to $23.66 billion for the current quarter, ending June 30, 2021. The stock has rallied 122.3% over the past nine months to close yesterday’s trading session at $15.63.
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NIO shares were trading at $43.24 per share on Wednesday afternoon, down $0.32 (-0.73%). Year-to-date, NIO has declined -11.28%, versus a 13.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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