- Auto stocks have been under pressure since the beginning of this year.
- Shares of legacy automakers have fallen to attractive levels.
- The current problems may have already been priced in by the market.
Auto stocks have fallen in recent months. Old automakers, speculative EV stocks like NIO and Rivian, and even Tesla were under pressure amid concerns about supply chain problems and the negative impact of rising commodity prices. This slump has pushed the inventories of old automakers to attractive levels.
General Motors has recently released its first quarter report. The company reported revenue of $35.98 billion and adjusted earnings of $2.09 per share, missing analyst estimates on revenue and beating them by profit.
The report did not provide much support for the stock, which continued to trade near annual lows due to general market sentiment.
Analysts expect General Motors to report earnings of $6.89 per share for the current year and earnings of $6.88 per share next year, so the stock is trading at less than 6 forward P/E.
While analysts don’t expect General Motors to increase its earnings in the near term, current valuation levels look attractive.
Ford also released its quarterly results this week. The market reacted negatively and the stock plunged to annual lows.
Ford is also valued at less than 6 forward P/E, so the market is somewhat skeptical about the near-term financial performance of legacy automakers.
There is room for multiple expansion, however, as higher interest rates are likely to force investors to seek low-cost companies with solid fundamentals.
Inflation and supply chain issues will continue to be the main bearish catalysts for Ford and other auto stocks, but these issues may already be priced in by the market.
Check out our economic calendar for an overview of today’s economic events.