The automobile market has taken quite an interesting turn this past year. Both new and used vehicles are fetching big bucks due to chip shortages. The price of a new or used ride will likely continue to increase or at least stagnate until the chip shortage is worked out, possibly at some point in the year ahead.
If you don't have auto stocks in your portfolio, now is the time to add at least one. Even those who have one or two auto stocks in their holdings should consider establishing another position in one of the industry's top players simply because demand for automobiles continues to increase as people begin to return to work and life as usual.
The chip shortage will eventually be worked out. The question is which stocks in the auto industry are most likely to pop as vehicle supply remains low while demand continues to spike. Let’s take a quick look at three auto stocks racing to new highs in Advanced Auto Parts (AAP), Cooper Tire & Rubber (CTB), and Toyota Motor Corporation (TM).
AAP
AAP is one of the top players in the auto aftermarket industry. The company sells auto replacement parts, accessories, and other vehicle-related sundries such as maintenance items, batteries, etc.
AAP has a forward P/E ratio of 19.83. This figure indicates AAP is fairly priced at around $212 per share. The stock's beta is 1.38 so it probably won't significantly undulate if the market gets wonky.
AAP has a B POWR Rating grade. This grade indicates investors can feel comfortable buying the stock. AAP has an A Quality component grade and a B grade in the Momentum component. The stock has Cs in the Value and Sentiment components. You can find out how AAP fares in the rest of the POWR Ratings components such as Stability and Growth by clicking here.
Out of the 66 publicly traded companies in the Auto Parts space, AAP is ranked 18th. Click here to learn more about the stocks in this segment.
The top analysts are bullish on AAP, setting an average target price of $219 for the stock. This price target represents around a 4% increase. The highest target price for the stock is $240. Of the 24 analysts who have issued AAP recommendations, seven view it as a Strong Buy, eight view it as a Buy, and nine view it as a Hold.
CTB
CTB is one of the top players in the tire industry. CTB has a B POWR Rating grade. The stock has an A Growth component grade along with Bs in the Value, Quality, and Momentum components of the POWR Ratings. You can find out how CTB fares in the rest of the POWR Ratings components such as Sentiment and Stability by clicking here.
Of the 67 stocks in the Auto Parts segment, CTB is ranked 11th. You can learn more about the stocks in this space by clicking here.
CTB's average analyst price target has increased by $1.75 across the prior two and a half months. Though CTB missed its first-quarter earnings, its sales topped analyst estimates. The analysts expected adjusted earnings of 71 cents per share. However, the company turned in earnings of 43 cents per share. It must be noted, CTB lost six cents per share in the same quarter in the year prior.
CTB net sales increased more than 23%, hitting $656 million in the initial quarter of the year. This jump in net sales is largely due to high unit volumes and favorable foreign currency dynamics.
TM
TM has long been one of the top automakers in the world both in terms of production and sales. TM’s full range of automobile models has true mass appeal. The company’s engineers are also hard at work on bringing automated vehicles and fuel cell vehicles to market. Fast forward to 2025 and TM will likely have several electric vehicle options available at affordable prices.
TM is a POWR Ratings success with a B grade as a whole. TM has an A Sentiment component along with Bs in the Growth and Stability components of the POWR Ratings. Investors who would like to know how TM fares in the remainder of the POWR Ratings components such as Quality, Value, and Momentum can find out by clicking here.
Of the 57 publicly traded companies in the Auto & Vehicle Manufacturers space, TM is ranked 17th. Click here to learn more about the stocks in this space.
TM has a beta of 0.57. This low beta is a sign TM should hold its value if the market sours as a whole. The stock has a low forward P/E ratio of 10.30. This low ratio indicates the stock might be underpriced at $178 per share. The stock is currently trading about $7 below its 52-week high of $185.38.
TM shares were trading at $181.55 per share on Thursday afternoon, up $1.68 (+0.93%). Year-to-date, TM has gained 19.13%, versus a 18.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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