Are These 3 Auto Stocks Set for 2024 Success

The auto industry is thriving, driven by pent-up demand for new cars, rapid EV adoption, and several technological advancements. So, let’s determine if auto stocks Tesla (TSLA), Ford Motor (F), and REV Group (REVG) are poised to capitalize on the industry’s tailwinds in 2024. Read more to find out….

The U.S. auto sales bounced back in 2023, marking a return to normalcy for the industry that has been on a roller coaster ride since the pandemic. Further, the widespread adoption of electric vehicles and rapid technology integration should fuel the industry’s long-term outlook.

Given the industry’s bright prospects, fundamentally sound auto stocks REV Group, Inc. (REVG) could be an ideal addition to your portfolio, while it seems prudent to wait for a better entry point in Ford Motor Co. (F). However, struggling Tesla, Inc. (TSLA) is best avoided now.

The U.S. automotive industry witnessed a solid rebound in 2023, with several car companies posting double-digit sales gains, concluding the sector’s best year since the pandemic. Robust auto sales were driven by pent-up demand and greater availability on dealership lots.

As per an estimate from research firm Wards Intelligence, industrywide sales of new cars in the U.S. totaled 15.5 million vehicles last year, an increase of 12.4% year-over-year.

According to a report by Market Research Future, the global automotive market is predicted to reach $6.07 trillion by 2030, growing at a CAGR of 6.9%. Increasing demand for high-end passenger vehicles and rapid urbanization will boost the market’s growth.

Rising fuel prices and the adverse impact of conventional gasoline vehicles on the environment have led to a significant shift to alternative fuel vehicles. This has led to the emergence and prevalence of Electric Vehicles (EVs). EV sales are projected to hit a new U.S. record in 2023.

EV sales are anticipated to reach a record 9% of all passenger vehicles in the U.S. last year, as per Atlas Public Policy. For the first time, more than 1 million EVs were sold in the country in one calendar year, reaching somewhere between 1.3 million and 1.4 million cars, the research firm forecasts.

As per Statista, the electric vehicle market in the U.S. is projected to grow at a CAGR of 18.2% during the forecast period (2024-2028), resulting in a market volume of $161.60 billion by 2028. Several government incentives and environmental consciousness among consumers will propel the market’s prospects.

Digital technologies such as Artificial Intelligence (AI), machine learning, blockchain, big data & analytics, Human-Machine Interfaces (HMI), and the Internet of Things (IoT) continue to revolutionize the auto industry by streamlining the operations, enhance the customer experience, and boost operational efficiencies.

In light of these favorable trends, let’s look at the fundamentals of the three Auto & Vehicle Manufacturer stocks, beginning with number 3.

Stock to Sell:

Stock #3: Tesla, Inc. (TSLA)

TSLA designs, develops, manufactures, leases, and sells electric vehicles (EVs), and energy generation and storage systems internationally. The company operates through two segments: Automotive; and Energy Generation and Storage. It also offers non-warranty after-sales vehicles, used vehicles, retail merchandise, and vehicle insurance services.

Tesla’s Cybertruck grapples with manufacturing challenges, sparking worries for the auto company. There are persistent challenges in ramping up the production of its 4680 batteries, consequently causing delays in the manufacturing of products, including the Cybertruck and Semi.

TSLA CEO Elon Musk accepted that overcoming these hurdles will require a span of 12 to 18 months, involving significant effort and dedication. Also, he indicated that Tesla is unlikely to achieve an annualized production rate of 250,000 Cybertrucks until sometime in 2025.

TSLA’s trailing-12-month gross profit margin of 19.81% is 44% lower than the industry average of 35.38%. Also, the stock’s trailing-12-month levered FCF margin of 1.68% is 69.6% lower than the industry average of 5.34%.

In terms of forward non-GAAP P/E, TSLA is trading at 74.92x, 378% higher than the industry average of 15.67x. Likewise, the stock’s forward Price/Sales multiple of 7.79 is 763.7% higher than the industry average of 0.90. Also, its forward Price/Cash Flow of 59.46x is significantly higher than the industry average of 9.76x.

During the third quarter that ended September 30, 2023, TSLA’s revenue from Automotive leasing decreased 21.2% year-over-year to $489 million. Its gross profit declined 22.4% year-over-year to $4.18 billion. The company’s adjusted EBITDA came in at $3.76 billion, a decline of 24.4% from the previous year’s period.

In addition, the company’s non-GAAP net income and EPS attributable to common stockholders came in at $2.32 billion and $0.66, down 36.6% and 37.1% from the prior year’s quarter, respectively. Its free cash flow declined 74.3%…