The auto sector is well on its way to a strong recovery this year after a rough 2023. Much of this optimism is driven by the shift in market conditions with increasing supply and declining prices. Analysts predict this will be a tailwind for auto stocks, creating numerous investment opportunities that are too promising to overlook.
A second catalyst for the industry is the electrification of cars. While the adoption of electric vehicles (EVs) is still in its early days, concerns over climate change give us good reason to believe that there will be a turnaround. Companies are making major advancements in EV technology to keep up with this anticipated demand.
As the auto industry experiences a paradigm shift, driven by changing market conditions and technological breakthroughs, there is no better time to get behind highly rated names in the sector.
General Motors (GM)
General Motors‘ (NYSE:GM) stock is on an upward trajectory after announcing a 33% increase in its dividend and a $10 billion share repurchase program earlier this year. The auto giant is appealing to its investors once again with an additional $6 billion in stock buybacks.
The news of the share buyback is reflective of GM’s increased profitability and commitment to rewarding shareholders for their loyalty. The company hopes to keep this momentum going through the fiscal year with annual earnings expected to increase by 22%.
As anticipated, shares of the company gained 1.35% on announcing the share buyback program, and analysts reiterated their optimism toward GM stock. Among the positive sentiments was that of Bank of America, which reissued its buy rating, projecting a 53.48% upside on its current price.
Citi also maintained its buy rating, stating that recent proprietary surveys indicate a resilient, strong U.S. auto market, which further bolstered its confidence in the stock’s performance. The bank holds its target price for GM stock at $96.
General Motors’ commitment to expanding the bottom line and rewarding shareholders through its buyback programs makes this one of the top strong buy auto stocks on the market.
Carvana (CVNA)
When it comes to auto stocks, the online used car giant Carvana (NYSE:CVNA) has become an investor favorite in recent months. After years of battling high logistical and fixed costs, the company developed a two-step cost and debt restructuring plan. This put it on a path of profitability.
The results of these initiatives came to fruition in Q1 of 2024 when the company reported the best financial results in its history. Now with its troubles in the rearview mirror, analyst and investor sentiments towards this stock are at an all-time high.
In its most recent earnings, Carvana reported revenue of $3.1 billion, up from $2.7 billion a year ago. However, its most impressive metric was its net income of $49 million over a net loss from the same quarter a year ago. The company raised income levels by optimizing its tech operations and prioritizing vehicle reconditioning.
While Carvana is still actively working to control debt levels, its ability to successfully cut costs signals brighter days ahead. If the company plays its cards right, it could be a huge winner in the next decade.
Analysts seem to agree, anticipating a double digit upside for CVNA stock at the $115 to $125 range.
The company’s impressive turnaround story makes this one of the best strong buy stocks in the auto sector today.
Ferrari (RACE)
Ferrari (NYSE:RACE) is perhaps most well known for its sports cars, but the company holds a strong lead in the luxury goods market. The diversity of its brand, which many consider a status symbol, has helped maintain its loyal customer base through good and bad times. A prime example of this: RACE stock took a hit after its recent quarterly earnings but still received a positive rating from Bernstein analysts.
Investor sentiment toward Ferrari stock waned after the company’s delivery numbers took a hit in Q1. Across the region of Taiwan and China with Hong Kong, shipments dropped by 20% and remained flat globally compared to last year. However, analysts kept their weight behind the stock for its strong baseline performance. Ferrari reported a 11% uptick in revenue and maintained its revenue guidance at $6.4 billion. This was below analyst estimates but a 4% growth versus the prior year.
According to Business Insider, RACE stock has a consensus buy rating with 22 analysts giving it a buy rating.
Ferrari is a name that deserves a spot in your wallet. Its unique position in the luxury goods market and strong financials makes RACE one of the best strong buy auto stocks on the market.
On the date of publication, Divya Premkumar did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Divya has a background in finance and accounting and has worked in FP&A roles at Fortune 500 companies. She is an avid reader and enjoys writing on a variety of topics including stocks, crypto, blockchain and global policy.