New-age automobile manufacturer Lucid Group Inc. (LCID), which is based in Newark, Calif., has been in the news for some time now. The company recently began deliveries of its highly anticipated Lucid Air sedan. The company plans to sell 20,000 cars in 2022. It is also planning to start production of its SUV in 2023.
But although the company’s ambitious plans look good on paper, the semiconductor chip shortage, which has been plaguing the prospects of the automobile industry this year, could force LCID to place the on-time delivery of its cars on the backseat. Also, according to Morgan Stanley analyst Adam Jonas, the stock is overvalued. He has rated LCID as underweight, with a $12 price target for the next 12 months, indicating a potential 67.7% decline.
LCID has an overall F rating in our POWR Ratings system, which equates to a Strong Sell. Therefore, we think that instead of LCID, it could be wise to bet on quality automobile stocks Volkswagen AG (VWAGY), Honda Motor Co., Ltd. (HMC), BRP Inc. (DOOO), and Rev Group Inc. (REVG). They are better rated in our proprietary rating system.
Volkswagen AG (VWAGY)
Headquartered in Wolfsburg, Germany, VWAGY manufactures and sells automobiles. It operates in four segments: passenger cars; light and heavy commercial vehicles; power engineering; and financial services. The company owns brands that include Audi, Porsche, Lamborghini, and Bugatti.
On November 3, 2021, VWAGY entered a partnership with EIT InnoEnergy and will become a shareholder in the EU-backed venture. Jens Wiese, VWAGY’s head of group M&A, investment advisory and partnerships, said, “The partnership with EIT InnoEnergy will help us find the most promising companies from all areas of the energy transition, which we can then support in scaling their business models.”
VWAGY’s earnings after tax for its fiscal third quarter, ended September 30, 2021, was €2.90 billion ($3.35 billion), representing a 5.6% increase year-over-year. Its cash flow from investing activities attributable to operating activities increased 67.2% year-over-year to €6.6 billion ($7.61 billion). The company’s sales revenue for the first nine months of its fiscal 2021 increased 20% to €186.6 billion ($215.80 billion) compared to the prior-year period.
Analysts expect VWAGY’s EPS and revenues for its fiscal year 2021 to increase 78.9% and 15.4%, respectively, year-over-year to $3.40 and $293.20 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 107.3% in price to close yesterday’s trading session at $34.
VWAGY’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
VWAGY has a B grade for Growth, Value, and Stability. In the Auto & Vehicle Manufacturers industry, it is ranked #2 of 62 stocks. To check the additional POWR Ratings of VWAGY for Momentum, Sentiment and Quality, click here.
Honda Motor Co., Ltd. (HMC)
Based in Tokyo, Japan, HMC develops, manufactures, and distributes automobiles, power products, motorcycles, and other products. It operates through four segments: Motorcycle Business; Automobile Business; Financial Services Business; and Life creation and Other Businesses. The company also sells spare parts, and provides after-sale services through retail dealers, independent distributors, and licensees.
On October 14, 2021, HMC announced its plans to debut its first electric vehicle (EV) brand in China, the world’s largest EV market. HMC and its local partners, Dongfeng Motor and GAC Group, will set up new production lines to roll out EVs. It is launching its own “e:N Series” brand under its well-recognized “H” emblem. It plans to roll out 10 models over the next five years.
HMC’s sales revenue for its fiscal first quarter, ended June 30, 2021, increased 68.7% year-over-year to ¥3,583.8 billion ($31.45 billion). The company’s operating profit came in at ¥243.21 billion ($2.13 billion) compared to a ¥113.7 billion ($997.72 million) loss in the prior-year quarter, while its profit for the period was ¥237.72 billion ($2.08 billion) compared to a ¥79.98 billion ($701.87 million) loss in the prior-year quarter. Also, Its EPS for the first quarter ended June 30, 2021, came in at ¥128.87 compared to a loss of ¥46.84 in the prior-year quarter.
Analysts expect its revenues for its fiscal year 2022 to increase 372.8% year-over-year to $133.74 billion. Its EPS for fiscal 2023 is expected to increase 36.1% year-over-year to $4.60. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 26.19% in price over the past year to close yesterday’s trading session at $30.74.
HMC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Value, and a B grade for Stability. In the Auto & Vehicle Manufacturers industry, it is ranked #5. Click here to check the additional ratings of HMC for Growth, Momentum, Sentiment, and Quality.
BRP Inc. (DOOO)
Headquartered in Valcourt, Canada, DOOO designs, develops, manufactures, distributes, and markets powersport vehicles, propulsion systems, and boats worldwide. Its products consist of Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft, Can-Am on and off-road vehicles, Alumacraft, Manitou, Quintrex, and Rotax marine propulsion systems, etc.
On October 20, 2021, DOOO received the Good Design Japan award, where the underlying theme was “Aspiration and action with consideration.” Its user-centric innovations in its Can-Am Spyder RT Sea to the sky, the Sea-Doo GTI SE, and the Sea-Doo RXP X were awarded.
Its revenues for the fiscal second quarter, ended July 31, 2021, increased 54.4% year-over-year to CAD1.90 billion ($1.53 billion), while its net income increased 68.8% year-over-year to CAD212.9 million ($171.3million). Also, Its EPS increased 153.5% year-over-year to CAD2.89. And its normalized EBITDA was up 94% year-over-year to CAD415 million ($334 million).
Analysts expect its revenues and EPS for its fiscal year 2022 to increase 34% and 77.3%, respectively, year-over-year to $ 6.32 billion and $7.57. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock gained 65.4% in price to close yesterday’s trading session at $93.29.
DOOO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Sentiment, and a B grade for Value.
Rev Group Inc. (REVG)
REVG designs, manufactures, and distributes specialty vehicles under varied brands, serving the fire and emergency, commercial infrastructure, and consumer leisure markets. The Milwaukee, Wisc., company sells its products to municipalities, government agencies, private contractors, consumers, and industrial and commercial end-users through its direct sales force or dealer network.
On November 1, 2021, REVG announced that it had received an order from The Mesa Fire and Medical Department for E-One Vector, which is North America’s first electric fire truck.
REVG’s net sales for its fiscal third quarter, ended July 31, 2021, increased 1.9% year-over-year to $593.30 million. Its adjusted net income increased 289% year-over-year to $24.50 million. REVG’s adjusted EBITDA increased 94.4% year-over-year to $41.60 million. And its EPS was $0.36 compared to a $0.06 loss in the prior-year quarter.
Analysts expect its EPS for its fiscal 2021 to increase 693.3% year-over-year to $1.19. Its revenues for its fiscal 2022 are expected to increase 9.3% year-over-year to $2.59 billion. In addition , it has surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 106.8% in price over the past year to close yesterday’s trading session at $16.67.
It’s no surprise that REVG has an overall B rating, which translates to a Buy in our POWR Rating system. It has a B grade for Growth and Value. It is ranked #9 in the Auto & Vehicle Manufacturers industry. Click here to check the additional ratings of REVG for Momentum, Stability, Sentiment, and Quality.
Want More Great Investing Ideas?
VWAGY shares were trading at $34.33 per share on Friday morning, up $0.33 (+0.97%). Year-to-date, VWAGY has gained 66.48%, versus a 26.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|VWAGY||Get Rating||Get Rating||Get Rating|
|LCID||Get Rating||Get Rating||Get Rating|
|HMC||Get Rating||Get Rating||Get Rating|
|DOOO||Get Rating||Get Rating||Get Rating|
|REVG||Get Rating||Get Rating||Get Rating|