Which Of These Automaker Stocks Deserve More Of Your Attention Right Now?
Electric vehicle (EV) stocks have been the poster child of growth stocks on Wall Street since 2020. That’s because these EV stocks have made unprecedented gains in 2020. If you have Tesla (NASDAQ: TSLA) or Nio (NYSE: NIO) in your portfolio, then you would have reaped significant gains. These two companies would likely be in the conversation to be on any investors’ list of top EV stocks to buy in the stock market today. There is a good reason for these gains after all as the world shifts towards renewable energy. But today, we are not going to talk about these challengers in the automotive industry. Instead, we are looking at what some might consider legacy players in the automotive space, namely General Motors (NYSE: GM) and Ford (NYSE: F).
EVs are an important part of meeting global goals on climate change. Investors today looking for top EV stocks to buy no longer need to chase the high price tag of Tesla or Nio. You see, companies like General Motors or Ford are not resting on their laurels when there’s innovation taking place in the automotive space. There’s no question that EVs are indeed a growing market. And these respectable automakers would inevitably want a piece of it.
Admittedly, the shortage of chips as pointed out by Qualcomm (NASDAQ: QCOM) last week may have caused automakers and investors to hold back on the excitement for the EV boom to continue. Such setbacks have left Ford and General Motors with no option but to cut production. However, if we are looking on the bright side, the supply constraint won’t last forever. That said, let’s take a closer look to see which top automotive stock holds more potential.
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Ford (F) Doubles Investment In EVs
Ford, the automaker that pioneered affordable personal transportation has been in the limelight recently. The company has been grabbing headlines with its new all-electric vehicle, the Mustang Mach-E.
Ford has been working hard to polish its vehicle lineup. If you are a petrolhead, you would have noticed it as well. What’s more, Ford has announced a near doubling of its planned investments in EV to $22 billion through 2025.
Last week, the company reported better than expected earnings per share (EPS) by a wide margin. Revenue, however, narrowly missed expectations. On top of its own vehicle line-up, Ford was also an early investor in Rivian Automotive. On January 19, Rivian received a new round of investment funding that valued the company at about $27.6B.
Ford Bets Big With Google Deal
Ford and Alphabet (NASDAQ: GOOGL) are entering a six-year deal that will make the tech giant responsible for much of Ford’s growing in-vehicle connectivity. This partnership is designed to streamline Ford’s operations and accelerate an ongoing $11 billion restructuring plan.
“It’s a tremendous opportunity. Bigger than electrification…All the digital capability and conductivity and the digital ecosystem outside of the vehicle are all coming together to a loyalty model, where people will have a much more difficult time switching brands.” – Ford CEO Jim Farley
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General Motors (GM) Is Not Hiding Its Ambitions To Be A Major EV Player
Like Ford, General Motors is another traditional automaker transitioning to electric. For the uninitiated, General Motors has an impressive lineup of EVs. The company’s Chevrolet Bolt and Chevrolet Volt are among the best-selling EVs in the US. Both of the models are much more affordable compared to Tesla’s models.
The legendary automaker is slated to report its quarterly report early Wednesday. General Motors’ profitability shifted into overdrive in the back half of 2020, helping finance an accelerated transition to EVs. So here’s the real question, is GM stock a buy ahead of its earnings?
Recall that in November, General Motors announced that it plans to invest $27 billion in EV and autonomous vehicles through 2025. The company also mentioned that it plans to release 30 EV models globally by 2025. In the near term, Morningstar analyst David Whiston says GM is poised to report some big fourth-quarter numbers in February. “We see the potential for good quarterly earnings, scheduled for Feb. 10, due to strong retail demand from GM’s pickups and full-size SUVs, which are the most profitable vehicles it sells,” Whiston said.
GM Partners With Microsoft To Ramp Up Self-Driving Vehicles
If you think electrification is the only thing GM is doing, you may be surprised with its progress in the autonomous vehicle (AV) technology space. The company has partnered with Microsoft (NASDAQ: MSFT) in leading a $2 billion investment round in self-driving car startup Cruise LLC. This is a deal that could potentially bring the software giant’s cloud and edge computing capabilities to the venture.
Now, as GM is transforming itself, investors may begin valuing it like an EV or AV stock. For instance, Morgan Stanley analyst Adam Jonas increased his price target for GM stock to $80. That represents an upside of more than 45%. Jonas believes the value of the new initiatives is more than sufficient to offset the decline in the old business.
F Stock Or GM Stock?
All in all, both companies look like safe investment bets for electric vehicles. Why? If you’re investing in high-flying EV stocks, you could potentially be buying into a classic stock market bubble. It might not end well. However, if you are buying either F stock or GM stock, you are looking at an established automaker with high exposure to EV and AV technology.
Of course, chip shortages may have complicated the near-term sales outlook. After all, nobody likes to see production delays, which have affected both companies. But one thing we can be relatively sure of is that these companies have undeniable potential in the EV space. Right now, GM stock may appear to be a more favorable EV stock considering its existing line-up of EVs is selling well in the U.S. That provides support to the viability of their ambition.
On the flip side, you can say that Ford has tremendous potential to become a force to be reckoned with its major restructuring and the introduction of more technology into its vehicles. As the iconic American auto pioneer continues to keep up with the times, will F stock see brighter days ahead?