Wall Street Favorites: 3 Auto Stocks With Strong Buy Ratings for May 2024


  • With UAW strikes resolved and interest rate cuts likely, nows the time to consider auto stocks to buy.
  • General Motors (GM): GM’s diverse strategy and solid ICE business have led to a gusher of free cash flows.
  • Stellantis (STLA): Stellantis continues to perform and grow its bottom-line at a rapid pace despite industry challenges.
  •  BYD (BYDDF): BYD’s impressive vehicle deliveries and innovative advancements in EV and autonomous technology highlight its market leadership and growth potential.
Auto Stocks to Buy - Wall Street Favorites: 3 Auto Stocks With Strong Buy Ratings for May 2024

Source: lumen-digital / Shutterstock.com

It’s safe to say that the stock market needs a push following a breather. After a breathtaking rally in tech stocks over the past year, the market’s taken a moment to pause. However, we saw the market gaining momentum again, and perhaps the cherry on top was the return of the infamous ‘Roaring Kitty,’ who effectively revitalized the meme stock mania. Hence, against this backdrop, I feel it’s best to consider exposure to the top auto stocks to buy again.

Auto stocks were far from the best performers in 2023, having been weighed down by multiple headwinds. Heightened interest rates and the United Auto Workers (UAW) strike added to the uncertainty, limiting the upside potential. However, with the UAW obstacle cleared out and the likelihood of a couple of rate cuts this year, betting on auto stocks to buy would be a wise move at this point. Here are three that deserve your attention.

Auto Stocks to Buy: General Motors (GM)

GM stock
Source: Jonathan Weiss / Shutterstock.com

General Motors (NYSE:GM) is a legacy automaker with a rich history of being one of the North American auto market bellwethers. Hence, we’ve seen it weather many storms over the past several years, consistently coming out on top. Moreover, it’s been committed to an all-electric future in recent years, investing north of $35 billion in EV and AV development through 2025. Nonetheless, while its long-term focus is centered on EVs, its internal combustion engine (ICE) business continues to provide a solid foundation. Its multi-pronged approach has effectively shielded it from the EV market downturn, with its stock up 40% last year.

Furthermore, GM remains an excellent pick from a financial perspective. Despite operating in an unconducive market, it has handily beaten estimates across both lines in the past six quarters.  Its most recent earnings print showed a 7.6% increase in sales to $43 billion on a year-over-year (YOY) basis, while its superb EPS of $2.62 blew past estimates by 50 cents.  Moreover, its management upped its adjusted free cash flow expectations to $8.5 billion to $10.5 billion, providing ample coverage for its shareholder rewards.

Stellantis N.V. (STLA)

Stellantis (STLA) logo at the transmission factory. The Stellantis subsidiaries of FCA are Chrysler, Dodge, Jeep, and Ram.
Source: Jonathan Weiss / Shutterstock.com

Stellantis (NYSE:STLA) is another formidable force in the automotive sphere. Formed following a 2021 merger of Fiat Chrysler and Peugeot, STLA stock has been a remarkably rewarding investment. To illustrate my point, STLA stock has offered a 61% 3-year return compared to the S&P 500’s 33% return. Its success has a lot to do with the pent-up vehicle demand post-pandemic and the company’s focus on top-and-bottom-line expansion.

2023 was a smashing year for the business, posting a 5% jump in sales to $204.5 million and a 5% increase in adjusted EPS to $6.93. Moreover, despite the headwinds from the UAW strike, it generated robust free cash flows of $13.9 billion. Additionally, it returned 51% of those cash flows in dividends and buybacks. As we advance, the firm is committed to achieving at least a double-digit adjusted operation margin on upwards of €190 billion in sales.

With all that growth, you can scoop up STLA stock for just 0.42 time’s forward sales estimates, 52% behind the sector median.


Close-up of BYD (BYDDY) logo on red car, symbolizing BYDDY stock
Source: shutterstock.com/Trygve Finkelsen

‘Tesla Killer’ BYD (OTCMKTS:BYDDF) is a leading Chinese EV manufacturer that is most befitting of the ‘strong buy’ EV stocks to buy tag. It has leapfrogged its completion in the past year, outperforming EV pioneer Tesla in becoming the top company in the niche. It delivered 936,446 total passenger vehicle deliveries year-to-date (YTD), head-and-shoulders above its peers. EV sales made up roughly 18% of these deliveries, which continues to rise each quarter.

Despite its tremendous progress, there’s more to come for BYD. The company recently announced its flagship “Shark” pickup truck, set to rival the Tesla Cybertruck. Additionally, BYD is also hot on the heels of Tesla on the autonomous driving front, having launched an AI-powered solution earlier in the year. Moreover, BYD is advancing its cutting-edge battery technology with a hefty $1.4 billion investment in a sodium-ion battery plant. These batteries are much smaller and more affordable EV batteries than lithium-ion alternatives.

On the date of publication, Muslim Farooque 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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

Article printed from InvestorPlace Media, https://investorplace.com/2024/05/wall-street-favorites-3-auto-stocks-with-strong-buy-ratings-for-may-2024/.

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