Auto sales in the US are predicted to rise due to pent-up demand and technological advancements. Moreover, the market is driven by increased interest in electric vehicles and driver-assistance systems.
Therefore, it could be wise for investors to buy fundamentally sound auto stock Ferrari N.V. (RACE) this month. However, I think Lucid Group, Inc. (LCID) could be best avoided, given its weak financials.
In November, the number of new vehicles sold in the U.S. was 1,242,376 units, up 8.8% from October 2022 and 2.6% from October 2023. This increase in the sales of new vehicles reflects a favorable trend in the automotive industry, reflecting increased customer confidence and demand. It also implies that the market is recovering from any potential setbacks or obstacles encountered in recent months.
The AI in automotive market is expected to grow at a 22.7% CAGR to $52.98 billion by 2028. Rising technological advancements and consumer preference for vehicles with advanced systems have been major drivers for AI in the automotive market.
Additionally, the sector has grown swiftly in response to digital technologies. These improvements have revolutionized vehicle manufacture and usage, opening up new avenues for business expansion.
However, the issues in the US auto sector are varied and dynamic. One of the major challenges is increased competition from international automakers, particularly those from lower-cost countries. Also, the sector is dealing with shifting consumer preferences and demands for more environmentally friendly and electrified automobiles.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
Stock to Buy:
Ferrari N.V. (RACE)
Headquartered in Maranello, Italy, RACE designs, engineers, manufactures, and sells luxury performance sports cars worldwide. It also provides spare parts, engines, after-sale services, repair, maintenance, and restoration services for cars and licenses its Ferrari brand to various producers and retailers of luxury and lifestyle goods.
RACE’s trailing-12-month net income margin of 20.27% is 348.3% higher than the 4.52% industry average. Its trailing-12-month ROCE of 45.01% is 295.2% higher than the 11.39% industry average.
For the fiscal third quarter that ended September 30, 2023, RACE’s net revenues increased 23.5% year-over-year to €1.54 billion ($1.69 billion), while its adjusted EBIT grew 41.5% from the year-ago quarter to €423 million ($464.51 million).
Also, the company’s adjusted net income and adjusted EPS stood at €332 million ($364.58 million) and €1.82, up 45.6% and 48% year-over-year, respectively.
Street expects RACE’s revenue to increase 16.9% year-over-year to $6.50 billion for the year ending December 2023. Its EPS is expected to grow 33.2% year-over-year to $7.40 for the same period. It has surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 58.4% to close the last trading session at $339.07.
RACE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RACE also has an A grade for Quality and a B for Sentiment and Stability. It is ranked #19 out of 51 stocks in the Auto & Vehicle Manufacturers industry. Click here to see the additional POWR Ratings for Growth, Value and Momentum for RACE.
Stock to Sell:
Lucid Group, Inc. (LCID)
Technology and automotive company LCID develops electric vehicle (EV) technologies. The company creates electric vehicles, EV powertrains, and battery systems.
LCID’s trailing-12-month ROCE of negative 61.30% is lower than the industry average of 11.39%, while its trailing-12-month negative ROTA of 29.61% is lower than the industry average of 4%.
LCID’s total cost and expenses came in at $890.69 million for the third quarter that ended September 30, 2023, up marginally year-over-year. Its loss from operations came in at $752.88 million, up 9.5% year-over-year. Moreover, the company’s net loss came in at $630.89 million, up 5.9% year-over-year. Also, its loss per share was $0.28.
Analysts expect LCID’s EPS to come in at negative $1.37 for the year ending 2023. Over the past year, the stock has lost 41.1% to close the last trading session at $4.26.
LCID overall F rating equates to a Strong Sell in our POWR Ratings system. It also has an F grade for Value, Stability and Quality and a D for Growth and Sentiment.
It is ranked last in the same industry. Beyond what is stated above, we’ve also rated LCID for Momentum. Get all LCID ratings here.
What To Do Next?
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RACE shares were trading at $337.04 per share on Thursday morning, down $2.03 (-0.60%). Year-to-date, RACE has gained 57.33%, versus a 25.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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