2022 was a tough year for some stock sectors, but it was very tough for all kinds of auto industry stocks, from suppliers to manufacturers, dealers and consumers who buy cars.
Thankfully, no tough year is resilient enough to wipe out the auto industry. And for long-term investors, the tough year has created a great opportunity to buy.
general motors (GM -1.51%) When quantum landscape (QS -7.50%) Here are two cheap or oversold auto stocks with great long-term prospects for investors to keep an eye on. Let’s take a closer look at these two buy now, never sell stocks.
^ SPX data from YCharts
1.GM: comeback leader
General Motors stock is down about 42% year-to-date, almost double the overall decline. S&P 500 The price-to-earnings ratio remains at 6.4 times. GM’s decline and low prices offer investors the opportunity to buy long-term positions in a company that has completely turned around from the Great Recession of 2007-2009. GM is poised for long-term growth by investing more in electric vehicles (something once ridiculed by management), self-driving technology, and even its services business.
Let’s scratch the surface of these strategies.
GM plans to launch a number of electric vehicles (EVs) by 2025, covering 31% of its vehicle segment. Cover more than 75% of your revenue. The Detroit automaker is aiming for a production capacity of roughly 1 million EV units in 2025, bringing its estimated sales to nearly $50 billion. Here are the important parts: GM estimates his low to mid-single-digit margins on his EV during that period.
GM’s EV future is bright, but it’s in a strong position through its development of self-driving vehicles with Cruise and its new BrightDrop business, which focuses on commercial delivery and logistics solutions. Keep in mind that BrightDrop has already reached his $1 billion in revenue next year, and he is expected to hit a 20% profit margin by the end of the decade.
Through EVs, self-driving vehicles, and commercial delivery solutions, GM projects total revenue growth of 12% annually through 2025, with an incredible uptick beyond. GM’s 2022 stock price drop offers investors a chance to get the giant automaker cheap.
2. QuantumScape: To be greedy or to be afraid?
Given the high risk and high return in the auto industry, you may not find a more polarizing company than battery maker QuantumScape.
If investors embrace the notion of famed investor Warren Buffett about being greedy when others are afraid, now might be the right time to consider QuantumScape. The stock has fallen about 74% to date. goldman sachs Analyst Mark Delaney has downgraded the stock from neutral to sell as the company is likely to generate negative earnings and cash flows for several years.
Indeed, the company is at least a year or two away from mass production of car batteries. We also have the cash to continue to fund the development of next-generation lithium batteries, but the stock may continue to languish in the near term, especially given the current macroeconomic headwinds. It is working on solid-state battery technology, which in theory is far superior to the current lithium-ion batteries found in EVs.
Image Source: QuantumScape Investor Presentation.
QuantumScape could be a big winner in the long run if investors are willing to own highly speculative stocks as a small part of their overall portfolio. The truth is that QuantumScape probably shouldn’t go public at this point, but blame management for taking the money on the table for allowing it to go public during his SPAC run in 2021. You can not.
Another truth is that for the industry to go mainstream and replace traditional internal combustion engines, it will be necessary to improve the performance of EV batteries and reduce their cost. If QuantumScape can deliver breakthrough battery technology in the next few years, it could be a big winner for investors.
As such, QuantumScape should be completely avoided by equity investors as is. very speculative, Or stocks that need to be nibbled on now and held forever in hopes of serious gains in the future.
the race just started
The automotive industry is evolving towards electrification, and that change is now gaining momentum. The industry is also developing some futuristic technologies that were once just science fiction, such as self-driving cars. The industry is evolving so quickly that there are many speculative and questionable companies, making it difficult to pick long-term winners.
But if investors do their due diligence and invest in companies they can trust, GM and QuantunScape should never sell and enjoy a long road ahead. And now, investors can get their hands on these two stocks at a discounted price.