When pinpointing undervalued auto stocks, many investors’ minds race straight to the iconic giants of the industry. Yet, as electric vehicle (EV) makers charge into the arena, we’re reminded that every automaker, whether a legacy brand or an upstart, can offer genuine investment merits.
Moreover, with a staggering 79.4 million units in global auto sales last year, it’s clear that auto stocks should play a key role in building investment portfolios. Additionally, the once-constrained semiconductor supply chain is showing signs of rejuvenation. As it strengthens, there’s a strong chance we’ll see a dip in auto stock prices, presenting long-term opportunities for savvy investors. Hence, while the classic car stocks to buy remain critical, it’s time we expand our horizons. This article will delve deep into the world of undervalued auto stocks, ensuring you have the insights needed to drive your investments to prosperous destinations.
Ford Motor (F)
Ford Motor (NYSE:F) has been shifting gears with commendable gusto. The Detroit automaker is roaring ahead after delivering another stellar quarterly report, surpassing estimates and revving up its full-year guidance. The financial dashboard glowed green with a robust 11.9% jump in sales to $45 billion, beating the consensus estimate and an incredible net income bump of $1.9 billion. Moreover, the adjusted EBIT clocked in at an impressive $3.8 billion against a $3.2 billion consensus. The balance sheet paints an even rosier picture with roughly $30 billion in cash, liquidity north of $47 billion, and an adjusted cash flow of $2.9 billion.
As electric currents ripple through the auto world, Ford recently made a bold move, slashing the price of its electric F-150 Lightning pick-up truck by a whopping $10,000 for its base model. And if that wasn’t enough, a price drop of at least $6,000 is on the horizon for other variants. Moreover, the automaker plans to triple the production of the F-150 Lightning by fall. Hence, F stock is positioned for long-term growth with its vision of becoming an EV juggernaut, robust financial scorecard and a price-to-sales ratio of just 0.3 times.
General Motors (GM)
General Motors (NYSE:GM) is revving for a green, sustainable and electric future. As one of the legacy automotive players, GM is poised to make a smooth transition into the realm of EVs.
Adding another feather to its cap, GM recently unveiled plans for an innovative feature in its fleet of electric vehicles: vehicle-to-home charging capabilities. Moreover, the charging capabilities could potentially support home backup power generators, proving invaluable during power outages induced by natural disasters.
GM shares have dipped recently, even though it announced heartening second-quarter earnings layered with optimistic forward guidance. With an EPS of $1.91, excluding one-time items, GM surpassed Wall Street’s consensus estimates of $1.85. The sales figures were equally robust, raking in $44.75 billion against an anticipated $42.13 billion. On top of that, it declared a nine-cent per share quarterly payout, boasting a forward yield of 4.5%. With an augmented focus on fiscal prudence, the automaker has ramped up its cost-cutting mission, targeting a massive $3 billion expenditure cut.
Despite the stellar performance, the stock trades at just 0.3 times forward sales estimates, more than 50% lower than the sector median.
Toyota (TM)
With its illustrious legacy, Toyota (NYSE:TM) is the first foreign automaker to carve out a sizeable share of the American auto space. Drawing from this rich history, Toyota is gearing up to replicate this success in the EV arena. Toyota’s fundamentals shimmer with promise, effectively transitioning to the EV realm while leaning into its stellar reputation. Moreover, the automaker dishes out an enticing forward yield of almost 3% while trading at just 0.8 times forward sales estimates, making it a worthy consideration for those searching for passive income streams.
The company is supercharging its EV ambitions, pointing to a groundbreaking solid-state battery to debut in 2025. This innovation has the potential to position Toyota as the vanguard in the realm of affordable consumer EVs. As we steer into fiscal year 2024, the automaker’s crystal ball forecasts a surge in global EV sales, eyeing a 29.7% year-on-year jump. On top of that, Battery EVs are projected to witness a staggering 137% uptick in sales units. This powerful growth trajectory translates to an annual 9.6% net income growth, accentuating Toyota’s prowess.
On the date of publication, Muslim Farooque did not hold (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.
