What an inspiration it has been to watch some auto stocks. Look at Tesla (NASDAQ:TSLA) as it has vaulted to a valuation that surpassed $1.2 trillion. Then there’s Ford (NYSE:F), which is electrifying its fleet, reinstating its dividend and surging to its highest price in nearly a decade.
No one seems to talk about Ferrari (NYSE:RACE), but this stock has recently exploded to all-time highs, too.
But just because these stocks are doing well does not mean that all auto stocks are doing well. In fact, many are simply muddling along.
The question now becomes, can these stocks start to emulate Ford and Tesla or will they continue to struggle?
An even more timely question begs to ask whether these stocks can find a new round of bullish momentum going into 2022. Let’s look at seven auto stocks that could zoom higher before the end of the year.
- General Motors (NYSE:GM)
- Lucid Motors (NASDAQ:LCID)
- Li Auto (NASDAQ:LI)
- XPeng (NYSE:XPEV)
- Nio (NYSE:NIO)
- Toyota Motors (NYSE:TM)
- Fisker (NYSE:FSR)
Top Auto Stocks to Buy: General Motors (GM)
For years, it’s always been Ford and General Motors. But at the moment, Ford has grabbed ahold of the wheel and taken control. Over the past 12 months, Ford is up 141% vs. GM’s gain of “just” 57.5%.
However, most of that outperformance began six months ago. Over that stretch, Ford shares are up 66% vs. GM’s gain of just 1.6%. Remember, it wasn’t all that long ago that GM was dominating the electric vehicle (EV) spotlight in Detroit.
Despite enormous supply chain and global economic issues, GM and other mega automakers have found a way to drive higher. From its recent low on Oct. 29, GM stock put together a five-day win streak good for a 10% gain.
Will that help kickstart GM’s move higher and allow it start playing catch-up to Ford? General Motors bulls sure are hoping so.
Analysts expect a near-20% boost in revenue next year, while GM continues to trade at less than 10 times earnings. It wouldn’t be surprising to see some funds rotate into this name before year end.
Lucid Motors (LCID)
Is Lucid Motors the next Tesla? That’s what some pundits and industry watchers are starting to say. Coming into the 2021, there were a ton of new entrants in the auto industry. In particular, these producers were focused on EVs and many listed via SPAC offerings.
Not many are panning out all that well, but Lucid is one of the few companies that’s actually doing well right now. The stock has been exploding higher lately as the good news continues to pour in. For instance, Motor Trend recently said Lucid’s new model is “the most compelling American luxury car in recent memory.”
LCID stock has climbed over four straight weeks, good for a 90% gain from the low to the high.
Further, get a look at its growth estimates. Analysts expects sales of just $76 million this year. However, that figure swells to $1.7 billion next year (the company says it can do $2.2 billion) and topping $4 billion in 2023.
If that’s the type of growth we can look forward to, then Lucid shares should certainly be heading higher. That’s even as shares are far from cheap, at 39x 2022 revenue estimates.
Top Auto Stocks to Buy: Li Auto (LI)
Nio was supposed to be the one dominating China’s EV industry. However, Li Auto and XPeng (the next name on this list) are making serious headway in this region. Of course, Tesla has a formidable position in China as well, but we’re talking about a pretty large market.
Keep in mind, China boasts a population of roughly 1.4 billion people and a middle class that’s larger than the entire U.S. population — and it’s growing quite quickly.
Like Lucid, Li Auto has rapid revenue growth on deck. However, unlike Lucid, it does not come with such a heavy valuation.
Analysts expect revenue to grow roughly 67% in 2022 to $6.46 billion. In 2023, consensus expectations call for revenue growth of 42% to more than $9 billion in revenue. That’s pretty darn impressive, especially with forecasts calling for almost break-even earnings this year and a slight push to profitability in 2022.
Of course, all of these are just estimates and with the gyrations in the global supply chain and various economies, these estimates are prone to change. However, it’s a very attractive setup, particularly with the stock trading at 4x next year’s revenue.
In October, Li delivered 7,649 vehicles, up more than 100% year over year.
Li Auto has momentum in its deliveries and so too does XPeng. The company said it delivered more than 10,100 vehicles in October, up more than 230% year over year. While the year-over-year results were impressive, it was down slightly vs. September.
Still, it’s clear that XPEV stock has strong momentum without much slowing it down at the moment.
I hate to keep pounding the table on consensus estimates, but the numbers with some of these companies look like software companies. That’s as many take reservations in the build-up to production, then have a massive stable of customers ready to fork up the cash.
Of course, the problem is sustaining new customers as time goes on, but Tesla proved that it’s possible.
For XPeng, analysts expect sales of $2.96 billion this year and for growth of more than 80% next year to $5.42 billion. In 2023, estimates for sales sit north of $8.4 billion.
Top Auto Stocks to Buy: Nio (NIO)
XPeng weighs in with a market cap of roughly $40 billion, about one-third more than Li Auto’s $31 billion market cap. However, both are overshadowed by Nio’s valuation of roughly $70 billion.
NIO stock hasn’t had the best momentum lately, as the company works through some solid yet bumpy growth. While it looked like the company was on the brink just a few years ago, it’s found a monstrous wave of momentum.
Nio has launched several new models and has really bolstered its financials. Between Nio, XPeng, Li Auto and the work Tesla is doing in China, the country is making a serious EV push.
When Nio delivered its October delivery results, it disappointed Wall Street. However, the stock reversed off its lows and closed higher on the day. Rallying on bad news is a bullish sign, oddly enough.
Now let’s see if Nio can join the other auto stocks and push higher into year end.
Toyota Motors (TM)
Let’s look away from some of the newcomers in the auto stocks, but let’s stay in the Asian region. Toyota is one of the world’s largest automakers, both by market cap and unit production.
With its $290 billion market cap, Toyota is one of the few stocks that’s actually kind of close to Tesla’s mammoth size.
Toyota’s a great company with strong brands, solid profitability and impressive technology. Given Toyota’s aim at fuel economy and renewables, I don’t expect it to miss out on the EV theme. That said, it’s not exactly making front page news with its electric vehicles.
A look at the chart on the right paints a pretty clear picture of why we like this one. Toyota stock has had trouble clearing the $185 area all year long. If it can do that, $200 may not be far off and then Toyota may be the talk of the auto stocks.
Top Auto Stocks to Buy: Fisker (FSR)
Rivian Automotive (NASDAQ:RIVN) just made its public debut and it should do pretty well given the momentum in auto stocks right now. That said, Fisker is another stock that may ride the coattails of Rivian.
Fisker made its debut in June 2020, but began trading under the “FSR” ticker in October of 2020. Since then, the stock has seen bouts of success and volatility. The gains have been nice, but Fisker stock has not been immune to deep selloffs.
Now up almost 40% in the past two weeks, bulls are looking for a potential run in FSR stock again.
Despite its $5.7 billion market cap, Fisker is fairly speculative as it’s effectively revenue-less this year. In 2022, analysts expect sales of just $247 million. However, if the automaker can hit its stride, 2023 estimates call for $2.2 billion in sales.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.