When the concept first materialized, autonomous vehicles were strictly limited to science fiction. As technology shifted from merely processing data into independently analyzing it, the driverless industry became science fact. Naturally, investment analysts pushed self-driving car stocks as the next big thing.
Now, autonomous vehicles may risk going full circle. A recent article from The Wall Street Journal blasted the driverless sector as mere marketing hype. Automaker after automaker filled their glossy brochures and slick media presentations with a litany of synergistic buzzwords.
But when you strip away the shallow advertising campaigns, what you’re left with is a concept far from realization. Rather than ushering in a new era in personal transportation, most gears in the driverless cog have been left disillusioned. It’s no surprise then that self-driving car stocks are among this year’s worst performers.
What truly stymies autonomous vehicles is that their ironic need for human involvement. As The Guardian’s John Naughton points out, driverless tech has limitations called “edge cases.” These are situations and environments that a driverless car’s artificial intelligence platform has never encountered.
Humans are incredibly adept at figuring things out on the fly. Machines, on the other hand, are many times unpredictable. In best-case scenarios, a driverless car will suffer a fender-bender. In worst-case scenarios, people die (and they have).
The autonomous-driving industry appears to have conceded that this innovation has more work ahead of it. In the meantime, here are seven self-driving car stocks you should probably avoid:
Self-Driving Car Stocks to Sell: Visteon (VC)
At first glance, Visteon (NASDAQ:VC) appears as a fundamentally-sound investment. A tech company that produces cockpit electronics with the ultimate aim of autonomous driving, VC has the right stuff: a strong balance sheet, much higher-than-average profitability margins and significant growth potential.
Gurufocus.com currently states that VC features six “good signs” and no negative indicators. That hasn’t saved the company from a 19% drop year-to-date. though. Worse yet, shares have tanked 14% since August 28th.
I would avoid the contrarian temptation here. VC suffers from a double-whammy. First, the WSJ story claims that autonomous vehicles face a challenging environment. Second, Visteon’s revenues have flatlined since 2015, and we see no indicators for an imminent recovery.
Self-Driving Car Stocks to Sell: Aptiv (APTV)
Aptiv (NYSE:APTV) might as well be the face of self-driving car stocks. A tech firm that focuses on smart-network integrations, they proudly proclaim their autonomous-vehicle credibility on their website. Beyond that, APTV envisions a future where entire cities are interconnected, creating a seamless transportation system.
The bears, on the other hand, will retort that APTV should learn to walk before running. While shares are profitable on a year-to-date basis, this is a mere technicality — and they’re only up 0.05% as of this writing. Since July-end, APTV stock dropped 16%. The resultant reactionary effort has so far yielded weak trading action, suggesting further declines are likely.
Financially, the company has tacked on a significant amount of debt to bolster its ambitions. Further, APTV has shown uninspiring growth stats over the past few years.
Self-Driving Car Stocks to Sell: Magna (MGA)
Magna’s (NYSE:MGA) catchy marketing slogan proclaims that they’re an expert in converting science-fiction thinking into automotive reality. Their media presentations demonstrate their advancements in autonomous-vehicle technology, leading investors to drive up MGA stock for the first five months of this year.
But of course, the calendar has 12 months listed, which appears problematic for MGA. Since the beginning of June, shares are down more than 16%. The tech firm suffered a particularly ugly gap-down session in early August. Moreover, shares have been choppy as traders digest the latest industry news.
I would sit this one out for now. Magna’s debt load has dramatically increased over the past five years, which means that they can’t afford industry miscues. With the autonomous sector appearing to be more fiction than reality, MGA stock is risky.
Self-Driving Car Stocks to Sell: General Motors (GM)
The hardest hit among self-driving car stocks are unsurprisingly automakers, and General Motors (NYSE:GM) unfortunately demonstrates this point. GM shares have slipped more than 14% YTD, and it’s unclear if a recovery is on the horizon.
I say mention General motors in particular because GM has emphasized autonomous vehicles as their ticket to the top. Management has previously stated their intention to put their commercial robotic vehicles into operation sometime next year. It’s a massive ambition, but apparently, that’s what Softbank (OTCMKTS:SFTBY) likes to hear. The Japanese company invested $2.25 billion in GM at the end of May.
I think that might be $2.25 billion wasted, especially if the WSJ’s warnings about the autonomous industry ring true. So far, GM is heavily vested towards self-driving vehicles. Potentially, they could emerge victorious in a battle nobody wants to win.
Self-Driving Car Stocks to Sell: AVX (AVX)
AVX Corporation (NYSE:AVX) isn’t exactly a household name, yet it’s one of the world’s largest suppliers of advanced electronic components. Obviously, autonomous vehicles depend upon these highly-attuned devices, and the company’s expertise has benefited AVX shareholders.
Compared to most other self-driving car stocks, shares have done very well this year. Since January’s opening price, AVX is up around 10%. Furthermore, the electronics manufacturer is fundamentally sound, featuring a zero-debt balance sheet. This gives management flexibility to handle unexpectedly rough waters, as well as the capacity for acquisitions.
Still, I’d look into taking some profits off the table. If the autonomous industry can’t deliver on its promises, demand for self-driving vehicle components will likely fall. That puts additional pressure on AVX, which trades at a premium compared to its competition.
Self-Driving Car Stocks to Sell: Adient (ADNT)
There’s no ifs, ands, or butts about it: Adient (NYSE:ADNT) products are insanely popular, even if we don’t recognize the brand name. Specializing in complete seating systems, ADNT is a fixture among all major automakers. Should autonomous driving move to the mass-integration stage, ADNT would enjoy — and dominate — a completely new market.
The cars of tomorrow probably won’t have a steering wheel as it would defeat the point. Manufacturers will also likely eliminate other driver-input segments such as the transmission column. Imagine the opportunities ADNT will have designing and implementing seating systems for this vehicle category.
One nagging problem remains, though: autonomous driving may not take off like previously forecasted. That adds headwinds to ADNT stock, which has already suffered significantly this year. Since the January opener, shares have tanked over 44%.
I’d steer clear until we see better signals.
Self-Driving Car Stocks to Sell: Tesla (TSLA)
Tesla’s (NASDAQ:TSLA) Elon Musk is a genius in what he does. Very few, if any, can match his uncanny ability to conceptualize, and later actualize innovative technologies. From his sleek, stylish electric vehicles to his astronomical ambitions, Musk’s scientific cred is unquestioned.
His business cred? That’s a completely different story. Musk has always been an eccentric character, but recently, he started affecting his organization. We all remember the bizarre earnings conference, which to his credit, he has apologized for. I genuinely thought this would spark a turnaround for him.
Instead, we got a cryptic message on social media that later launched an SEC investigation. We’re still in the midst of that investigation. TSLA also lost key executives in quick succession. This is even more startling because Tesla finally started hitting its Model 3 production goals.
Finally, don’t get me started on Musk’s agricultural knowledge. I’m not judging the man. However, when you’re potentially running afoul of the SEC, smoking pot in public just isn’t a good look.
It doesn’t take a genius to figure that one out.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.