3 Top Auto Stocks for 2022, According to RBC

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We’re astir to crook the leafage connected the calendar, enactment 2021 down us, and stride into the brave, caller twelvemonth of 2022 – and Wall Street’s prognosticators are engaged scanning the stocks to find the winners and losers for adjacent year’s markets. Whether it’s idiosyncratic stocks, full manufacture sectors, oregon immoderate operation of both, the analysts are uncovering plentifulness of Buy-rated equities for investors to consider.

Take the automotive sector. Few industrials volition contiguous arsenic galore concern opportunities, some successful 2022 and going forward; it’s an indispensable industry, and it’s successful the midst of a sea-change arsenic electrical and alt-fuel thrust technologies are expanding, and gasoline engines are falling retired of societal favor.

In sum for RBC, expert Joseph Spak sees the car assemblage primed for a beardown rebound post-COVID. He writes, “We judge the multi-year measurement betterment backdrop driven by betterment successful semiconductor and proviso concatenation availability coupled with debased inventories and improving docket stableness provides a coagulated backdrop for the suppliers.”

Spak acknowledges near-term volatility, of course. Semiconductor chips are inactive successful abbreviated supply, and transport bottlenecks are inactive plaguing the industry, but user request is rising, and recognition should stay plentiful adjacent if the Fed does instrumentality a complaint summation adjacent year. All of this, successful Spak’s view, adds up to a 2H22 weighting for improvements successful automotive stocks.

Against this backdrop, the expert is pounding the array connected 3 car stocks successful particular, noting that each has the imaginable to present beardown gains successful the twelvemonth ahead. We ran the names done TipRanks’ database to spot what different Wall Street’s analysts person to accidental astir them.

Rivian Automotive (RIVN)

We’ll commencement successful the EV (electric vehicle) segment, with Rivian Automotive. This company, which has been successful concern since 2009, is moving to make a caller level to marque businesslike usage of some the hardware and bundle sides of the emerging EV technology. The basal thought is to make a flexible chassis that includes a built-in electrical thrust system, with fittings for assorted artillery units depending connected need, and capable to judge modification done assemblage and seating installations.

It’s an ambitious plan. Rivian’s attack volition enactment assorted conveyance types with a precocious level of parts interchangeability for easiness of manufacture and outgo control, portion allowing customers to bargain a powerfully individualized vehicle. So far, Rivian has 2 conveyance models successful prototype accumulation development; their R1T is simply a airy pickup truck, portion their R1S is an SUV. Both usage the communal level and tin thrust on- oregon off-road. The institution has received astir 71,000 pre-orders for the R1 from the US and Canada.

In summation to the 2 consumer-oriented models, Rivian is moving successful concern with Amazon to make an all-electric transportation van, optimized for municipality environments. The archetypal bid from Amazon volition full 100,000 vehicles.

Rivian has been successfully raising funds successful the past year, including a $2.65 cardinal backing circular successful January of this twelvemonth and a $2.5 cardinal circular successful June. These were followed by the company’s well-publicized November IPO, which saw Rivian rise $12 cardinal successful gross proceeds. Since being listed, the banal has been precise volatile, yet inactive boasts a marketplace headdress implicit $87 billion.

This month, Rivian released its archetypal quarterly study arsenic a nationalist steadfast and showed immoderate important milestones – and headwinds. On the antagonistic side, the institution reported a heavy operational loss, of $1.23 billion, though the fig was good wrong the erstwhile guidance of $1.21 cardinal to $1.28 billion. Worse than the currency burn, the institution admitted that proviso concatenation problems person slowed production, and it volition autumn ‘several 100 vehicles short’ of the planned 2021 accumulation full of 1,200 EVs.

On the affirmative side, Rivian’s pre-orders person been accelerating. The 71,000 full for R1s is up 28% from the November figure. And, the institution volition beryllium opening a caller artillery and assembly installation adjacent Atlanta, Georgia, with operation starting successful mid-2022 and the installation opening operations successful 2024. The works is planned for accumulation capableness of 400,000 vehicles annually.

RBC’s Spak is bullish connected this company. He notes the Amazon concern arsenic a way toward definite income of electrical transportation vans and a ft into the municipality ‘last mile’ transportation market, and sees that arsenic thing of a information nett for the company. On the user side, Spak writes, “We similar the segments Rivian is going aft and the merchandise looks similar a winner. Rivian volition initially absorption connected the NA market, a portion we judge is connected the cusp of a BEV inflection. Further, ~77% of 2021YTD US airy conveyance income are trucks which is wherever the Rivian user portfolio is focused. Rivian’s archetypal user products, the R1T and R1S, are precise awesome and class defining.”

These comments backmost up an Outperform (i.e. Buy) rating, and a $165 terms people implies an upside of 70% for the twelvemonth ahead. (To ticker Spak’s way record, click here)

The RBC presumption is connected the bullish end; overall, Wall Street gives this banal a Moderate Buy statement rating, based connected 14 reviews including 10 to Buy and 4 to Hold. The shares are selling for $96.84 and their $134.64 mean terms people suggests that RIVN banal has country to tally different 39% implicit the adjacent 12 months. (See RIVN banal investigation connected TipRanks)

General Motors (GM)

The adjacent automotive banal connected our database needs nary introduction. GM is 1 of the large bequest automakers, and 1 of Detroit’s astir storied names. The institution is the largest of the Big Three automakers, and its merchandise portfolio includes immoderate celebrated nameplates: Buick, Cadillac, and GMC, to springiness conscionable a few.

The institution has seen its banal summation by an awesome 37% year-to-date adjacent arsenic revenues person slipped implicit the people of the year. For Q3, the apical enactment came successful astatine $26.7 billion, down from $34.1 cardinal reported successful Q2, and down 24% from the year-ago quarter. Earnings person besides slipped; the $1.52 reported was the lowest since the pandemic-induced nonaccomplishment of 50 cents per stock successful 2Q20.

While revenues and net showed declines, GM’s marketplace stock showed a much analyzable picture. The company’s income information amusement it commands a 13.3% marketplace stock successful the US automotive sector, compared to conscionable 6.9% successful the year-ago quarter. But – marketplace stock successful Q2 was higher, astatine 15.6%. The volatility present was driven by a diminution successful car sales; GM reported moving 446,997 vehicles of each types successful Q3, down 33% yoy.

Company absorption pointed to proviso concatenation disruptions and semiconductor shortages – factors affecting the manufacture arsenic a full – arsenic basal causes of the unsmooth quarterly income and results. They are not, however, sitting connected their duffs.

GM is actively preparing for the car industry’s displacement to EVs. The institution already produces the Chevy Bolt, an all-electric compact car, and its BrightDrop part is successful accumulation of all-electric airy commercialized vehicles for some the first- and last-mile transportation niches. BrightDrop this period delivered its archetypal 5 EV600 transportation vans to FedEx (FDX). These vehicles are the archetypal of a 500-truck bid by FedEx.

Also connected the EV front, GM announced connected December 7 a large concern astatine its Bedford, Indiana aluminum casting facility. The investment, of $51 million, is for modernization and upgrades that volition let the works to nutrient thrust portion castings for the upcoming all-electric mentation of the fashionable Silverado pickup truck.

These past fewer items bring america to an important constituent that Joseph Spak makes – that ‘automaking starts with product.’ Spak goes connected to delineate GM’s upcoming EV merchandise line. He writes, “GM has an onslaught of BEVs coming to marketplace including the Hummer, Lyriq, e-Silverado/Sierra and respective high-volume entries similar e-Equinox/Blazer equivalents priced astatine $30k (and hinted astatine thing priced adjacent lower) arsenic portion of 30 EV models by 2025 (1mm units). Showing caller Ultium (GM’s artillery and centrifugal tech platform) merchandise with competitory pricing and amended specs is key, successful our view.”

Spak rates GM shares arsenic different Outperform (Buy), and helium sets a $74 terms people connected this bequest stock, suggesting a 12-month upside of 30%.

Does the Street agree? It would look so, arsenic GM’s 13 caller expert reviews interruption down 11 to 2 successful favour of Buy implicit Hold, for a Strong Buy statement rating. The shares are selling for $56.91 and their mean people of $74.08 is practically identical to Spak’s objective. (See GM’s banal investigation astatine TipRanks.)

Autoliv (ALV)

You don’t conscionable bargain a car, you besides bargain its ancillary systems and accessories. And this means that determination are much concern opportunities than conscionable automakers successful the automotive sector. Autoliv is simply a information company, producing a scope of information systems including airbags and seatbelts, passive information electronics, and adjacent steering wheels. The institution handles each aspects of the accumulation process, from improvement to manufacturing to marketing, and successful 2020 had a 42% marketplace and $7.46 cardinal successful full revenue.

Autoliv is simply a large Tier 1 supplier to the automotive industry, and boasts a hefty web to enactment its operations. The institution has 5,700 workers – astir 10% of its workforce – progressive successful R&D, and has 14 method centers astir the world. Among them, these tech centers person 20 trial tracks, a captious portion of infrastructure successful the manufacture – and much than immoderate different automotive parts supplier successful the information segment.

This twelvemonth has been hard for Autoliv, for the aforesaid reasons that GM has besides had a hard year. The proviso concatenation problems person disrupted some acquisition of materials and organisation of products; arsenic a result, successful 3Q21, the institution reported $1.85 cardinal successful revenue, down by 9% from the year-ago quarter. EPS was besides down, by much than half, from $1.48 per stock successful 3Q20 to 73 cents successful 3Q21.

On a affirmative note, Autoliv is inactive connected way to bushed past year’s full revenues. For the archetypal 3 quarters, the institution posted $6.11 cardinal astatine the apical line, compared to $4.94 cardinal successful the archetypal 3 quarters past year. Also positive, Autoliv reported operating currency travel successful Q3 of $188 million, including $77 cardinal successful escaped currency flow. This was much than capable to enactment continued nett sharing, including a communal stock dividend of 62 cents and an assertive stock repurchase program.

Once again, we’ll crook to Joseph Spak, who is intelligibly sanguine astir what helium sees here, writing, “We presumption ALV arsenic a banal to thrust the rhythm to higher volumes, margins and currency travel with charismatic superior returns and faces nary overhang from the powertrain modulation and/or insourcing statement among suppliers.”

Turning to the company’s currency position, Spak adds, “While guidance technically calls for yearly FCF >$600mm, we judge it could beryllium higher driven by volume, margins and moving superior release. ALV announced a $1.5bn stock repurchase programme which is >15% of existent marketplace cap…”

In enactment with these comments, Spak rates ALV arsenic Outperform (Buy). He puts a terms people of $130 connected this stock, indicating imaginable for 29% upside by the extremity of 2022.

Again, we’re looking astatine a banal that Wall Street is treating with immoderate caution. There are 12 caller reviews here, and they see 5 to Buy against 7 to Hold, for a Moderate Buy consensus. The mean terms people of $110.27 implies a humble 9% upside from the trading terms of $101.06. (See Autoliv’s banal investigation astatine TipRanks)

To find bully ideas for stocks trading astatine charismatic valuations, sojourn TipRanks’ Best Stocks to Buy, a recently launched instrumentality that unites each of TipRanks’ equity insights.

Disclaimer: The opinions expressed successful this nonfiction are solely those of the featured analysts. The contented is intended to beryllium utilized for informational purposes only. It is precise important to bash your ain investigation earlier making immoderate investment.

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