We are about to turn the page and put 2021 behind us. As we stride into the new year, investment analysts are busy scanning the stocks market to discover the losers and winners of the 2021 stock market.
Whether it’s whole industry sectors, individual stocks, or the combination of both, automotive stock analysts are discovering many buy-rated equities for investors to consider. Only a few industrials will present as many opportunities in 2022 and upwards in the automotive sector.
It is an essential industry, and it is in the midst of a crucial transformation process as electric. Alt-fuel vehicle technologies are growing rapidly; gasoline engine vehicles are also falling out of social favor.
In coverage for RBC, investment analyst Joseph Spak sees the automotive sector primed for a strong comeback after the coronavirus pandemic. Joseph Spak also acknowledges the short-term volatility of the industry, of course. Computer chips needed to produce new vehicles are still in short supply, but consumer demands are increasing, so credit should remain high even if the Fed implements a rate increase next year. This adds up to a 2022 weighting for improvements in automotive stock.
Against this, Joseph Spak is pounding the table on three automotive stocks, in particular, noting that each has strong potentials to deliver massive gains in 2022. Those three stocks are:
Rivian Automotive (RIVN)
Rivian Automotive is in the EV (electric vehicle segment). Rivan Automotive has been in business since 2009. It is working to develop a platform to make proper use of both the software and hardware sides of the developing electric vehicle technology. The company’s basic idea is to create a flexible structure that includes an in-built electric drive system with battery unit fittings depending on the need and can accept adjustments through seating and body installations. This is an ambitious approach. The idea is to support many vehicle types with highly interchangeable parts for cost control and easy production, and at the same time, allowing consumers to purchase highly individualized cars.
Rivian has two vehicle models currently in production; a light pick-up truck and an SUV. The company has received about 71,000 pre-orders for the pick-up truck from the United States and Canada alone. In addition, Rivian is partnering with Amazon to develop a fully electric vehicle delivery van mainly for urban environments.
Rivian stocks have been very volatile since being listed but still boast a market capitalization of $87 billion and raised $12 billion on gross proceeds in November. Rivan Automotive reported an operating loss of about $1.28 billion this month on the negative side. This is in addition to slowed production due to supply chain problems. On the positive side, however, pre-orders have accelerated up to 28% from the November figure, and the company will be launching a new assembly and battery facility near Atlanta, Georgia. The plant is planned to produce approximately 400,000 vehicles annually.
Joseph Spak’s comments on the company back up a buy-rating that implies an upside of 70% for 2022. RIVN shares are sold for $96.84, and their average price tag of $134.64 suggests that Rivian’s stocks can run another 39% over the next year.
General Motors (GM)
The next best automotive stock on our list does not need any introduction. General Motors is one of the significant legacy carmakers and is the largest Big Three carmaker.
General Motor stocks have gained an impressive 37% even though revenues have slipped over this year. For 83, GM’s top line came in at $26.7 billion, which is lower than the $34.1 billion reported in Q2 and even lower by 24% from the year-ago quarter. Profits have also slipped over. The pandemic induced a loss of 50 cents per share in 2020.
Data show that GM commands a 13.3% share in the US automotive market compared to just 6.9% in the year-ago quarter. Despite these problems, the company is actively preparing to transform into electric vehicles. GM also announced a $51 million investment in EVs.
Joseph Spak rates General Motors shares as another outperform, setting a $74 price target on this stock, suggesting a one-year rise of 30%. GM shares are selling for 56.91% with an average rate of $74.08, which is practically identical to Joseph Spak’s objective.
Autoliv (ALV)
Buying a car is one thing. So is getting its accessories and ancillary systems. This means that there is more than just the automaking sectors when it comes to automotive stocks.
Autoliv is a safety company that produces a range of safety systems consisting of seatbelts, airbags and even steering wheels. Autoliv generated $7.46 billion and 42% in total revenue, beating last year’s record. Also positive, this resulted in a common share dividend of 62 cents and an aggressive share repurchase program. Joseph Spak rates Autoliv as a buy, putting a price tag of $130 on the stock with a potential rise of 29% by the end of 2022.
Tesla
Tesla is the world’s largest automaker by market value. The company manufactures, designs and sells electric vehicles. Tesla is also in the business of storage products and energy generation for personal and commercial use. Leading the most popular electric vehicle stocks, Tesla reported production of 237,823 vehicles in Q3 despite the shortage in semiconductors that disrupted production in the auto industry this year. Tesla produces its own batteries and semiconductor chips, unlike other companies that depend on manufacturers in China.
Tesla’s share price has gone up as high as 76% this year. However, shares have slipped back to $1000 per share after Tesla CEO Elon Musk sold off 10% of his stock options. The average one-year analyst price target is $798. Analysts at Deutsche Bank on 14th December reiterated their buy-rating with a price target of $1000 by the end of 2022.
Conclusion
If you want to participate in the success story of electric vehicles in the coming years, the EV stocks will be a good investment for your portfolio. However, whether Tesla, RIVN, AVL, or GM shares depends on your risk tolerance, investing goals and personal financial circumstances. You can also consult investment analysts to determine which is most suitable for you.
