Are These The Best Auto Stocks To Own Right Now?
Automotive stocks have been rising once again in the market. Particularly automotive stocks with high-tech elements in it. It seems to me like almost everyone can recall a long list of automotive brands. But here, we are going to talk about electric vehicle stocks. There are only a handful of dominant players in the market that people and investors know by heart.
Because of such visibility, automotive stocks have drawn great interest from investors in the recent decade. This comes as governments all over the world are trying to reduce emissions from cars powered by internal combustion engines. This suggests the switch to electric vehicles will be a long term trend.
Can Auto Stocks Survive The Covid-19 Storm?
Automotive companies are famously cyclical, tending to advance or decline with the broader economy. Of course, in the aftermath of Covid-19, we are currently in a recession. Yet, we are seeing certain automotive stocks receiving a lot of attention. Why is this happening even though we are in the midst of an economic downturn? Are investors in these stocks expecting sales to recover quickly?
For sure, there are automotive companies that have had to slow down their production due to a sharp decline in auto sales. But today we are going to focus on those that are seemingly performing well in the current quarter and have a good growth projection. Now, let’s take a closer look at two of the automotive stocks that are trending in June.
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Top Auto Stocks To Watch In June 2020: Tesla Inc
Tesla Inc (TSLA Stock Report) has been a big driving force for Nasdaq 100’s success lately. Now that the company has broken the $1,000 mark, some see the electric vehicle maker’s stock heading much higher in the near future. The rise in TSLA stock has taken many investors by surprise. Even some of the most bullish investors were caught off guard when it rebounded so quickly from March’s sell-off.
Jefferies analyst Philippe Houchois took his Tesla price target to $1,200 from $650. And he says that under his upside scenario, shares of the highflying electric-vehicle company could reach $1,400. From this comment, investors are clearly very excited about the company’s prospect.
With the stock trading around $1,000 right now, achieving the $1,200 target isn’t quite a stretch. The surge in TSLA stock was partly due to the demand for the Model 3 in China ramping up stronger than expected. Now that Tesla has recently resumed their operations at its auto production plant in Fremont, California, is TSLA stock a buy?
Top Auto Stocks To Watch In June 2020: Nio Inc.
Shares of Chinese electric vehicle maker Nio Inc (NIO Stock Report) are trading higher this week amid stronger sales reports. The Company successfully raised $400 million through a secondary stock offering. The company initially planned to offer 60 million shares. But it decided to increase the offering one day after the announcement. This signals that the demand for NIO stocks may have been stronger than the investment banks had anticipated.
“We expect NIO China will use the cash investments for research and development of products, services and technology, development of our manufacturing facilities and roll-out of our supply chain, operation and development of our sales and service network and general business support purpose[s],”– Company statement
Tesla or Nio: Which Is A Safer Bet?
All in all, Nio’s recent growth and slightly lower valuation makes it a more compelling investment. That said, Nio is still a riskier bet, given its high cash burn and fierce competition in the world’s largest electric vehicle market. On the other hand, while Tesla stock is expensive, the company’s dominant position in the EV space, its industry leading technology and software differentiation make the high price tag justifiable. Also, the fast improving profitability picture provides investors a better safety net.