Top 3 Automotive Stock Picks for the New Year

Stocks to buy

The automotive industry is one of the most important sectors for economic growth. With several automakers moving towards electrification, there are mixed opinions about the future of the industry. While many believe that the future will be electric, the demand for EVs is slowing. This could be due to the low consumer spending. However, some of the top automakers have been thriving despite concerns about inflation, supply chain issues and low EV demand. If you are looking to update your investment portfolio with some automotive stock picks for 2024, here are my top picks.

Ferrari (RACE)

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One of the top automotive stock picks for the New Year, Ferrari (NASDAQ:RACE) is known for its high-end sports cars. It is a luxury brand that caters to a premium clientele. However, the company isn’t as popular as other automakers, meaning investors are missing out on this solid automotive stock. RACE stock is up over 243% in the past five years and up 56% year to date.

Trading at nearly $338 today, the stock is a great addition to your portfolio. The company isn’t impacted by the economic ups and downs and has an impressive booking backlog that works in its favor.

It has the brand image, loyal customers and pricing power which has ensured its top spot in the industry. As compared to the other automakers, Ferrari manufactures a limited number of cars and sells them annually. The limited supply of cars the company produces allows it to put a high price tag on them.
This year, the company started shipping its sport utility vehicle, Purosangue and opened the doors towards a new segment. It is also making progress with its electric vehicle and has two hybrids. Its first fully electric supercar could debut in the market in 2025.

It pains to launch 15 new models by 2026. Fundamentally, Ferrari saw a 24% increase in revenue and a whopping 46% increase in net profits in the recent quarter. It delivered 3,459 vehicles in the third quarter. The company has a huge backlog, a strong clientele and a solid history of performance. You will never regret owning Ferrari stock.

Li Auto (LI)

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I have been pounding the table about Li Auto (NASDAQ:LI) and I believe it is gradually inching closer to becoming a leader in the EV space. One of the best Chinese EV makers and automotive stock picks, Li Auto has impressed investors with the fundamentals and the delivery numbers.

It delivered over 40,000 cars in November and aims to continue with the same momentum in the coming months. The company has met delivery projections for the past two quarters and beat analyst expectations. Its third-quarter deliveries were up 296% year over year. I expect a 100% return on this stock in 2024, and the sooner you buy it, the higher your gains. It remains one of the best automotive stock picks to own.

A highly reliable stock, LI is exchanging hands at $34 today and has soared 64% year to date. It is set to start the new year on a high note with impressive fundamentals and a fully electric EV model, Li Mega. The company received over 10,000 reservations for this model in less than two hours. This says a lot about Li’s cars and the faith that customers have.

Li also has some of the best-selling models in China, and it has gone from negative free cash flow in the third quarter of 2022 to a positive free cash flow in the third quarter this year. 

It is worth noting that the company holds a strong market share in China and if it starts expanding globally, it could reach new highs in the years to come. In the fourth quarter, it aims to report deliveries between 125,000 and 128,000 vehicles, and revenue between $5.27 billion to $5.40 billion. I believe it will be able to beat expectations yet again.

General Motors (GM) 

Source: Katherine Welles / Shutterstock.com

General Motors (NYSE:GM) suffered during the United Auto Workers strike but the company knows how to bounce back. This strike will cost about $1.1 billion in operating profit due to the production loss, but it has reinstated the guidance. The automaker now expects the net income in the range of $9.1 billion to $9.7 billion, down from the previous range of $9.3 billion to $10.7 billion. It expects an EPS ranging between $7.20 to $7.70 for the year. 

In the quarter, its revenue came in at $44.13 billion, and the EPS stood at $2.28, beating expectations. The company is focusing on EVs and aims to continue increasing production in the coming year. 

The company has strong delivery numbers and it saw a 21% jump year over year to reach 674,336 vehicles in the third quarter. It has also managed to deliver more than 20,000 EVs in the quarter and is one of the leading EV makers.

The company has unveiled a buyback program and raised the dividend to $0.12 per quarter, up 33%. This $10 billion stock buyback program shows that it puts the investors at the forefront and this move was cheered by shareholders. The company will be investing huge amounts in electric vehicles and has a long way to go.

Trading at $36 today, it is one of the top automotive stock picks that looks highly undervalued to me and it could soar higher in 2024. I am expecting at least a 50% upside in the coming year.

On the date of publication, Vandita Jadeja 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.

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