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J.P. Morgan: 2 Auto Stocks That Can Charge Forward in 2021
The US auto industry is looking up, despite the COVID pandemic – and that has car watchers and Wall Street analysts alike moving toward a cautious optimism. Customers are starting to buy cars again, as shown by Toyota Motor’s December figures: The company reported sales of 249,601 vehicles, up 20.4% year-over-year. Now, with vaccination rates increasing and better spring weather just a couple of months away, the car companies are predicting increased demand – and for 2021, they expect to see substantial year-over-year gains as they recoup from depressed sales in the ‘corona year.’ Against this backdrop, J.P. Morgan is pounding the table on two auto stocks in particular, noting that each could surge at least 20% in the year ahead. We ran the the two through TipRanks database to see what other Wall Street’s analysts have to say about them. Ford Motor (F) Ford Motor is the smallest of Detroit’s Big Three. Boasting a $45 billion market cap, however, Ford shows that ‘small’ is a relative concept. The company also boasts a loyal customer base and a solid sales foundation build on the F-series pickups. Ford’s Q3 revenue, at $37.5 billion, showed a turnaround from the corona-induced losses of 1H20; it was the strongest quarter yet reported for 2020, and beat expectations by 13%. Net profit for the third quarter was $2.34 billion in Q3, a 22% year-over-year gain. The quarterly performance was bolstered by a 35% market share for the F-series trucks in the US market, a 22% increase in product shipments to China, and the best performance by Ford Credit in 15 years. In recent months, however, Ford has taken some hits. The company was forced to issue a pair of safety recalls in the North American market this past November, on select models of the Taurus, Explorer, Edge, and Lincoln Aviator vehicles. And earlier this month, Ford announced that it would take a $4.1 billion hit due to the closure of three manufacturing plants in Brazil. Reviewing Ford for JPM, analyst Ryan Brinkman notes several factors that will support the stock. “We find Ford shares attractive given valuation only roughly in line with history despite a number of significant positives, including (1) a substantially refreshed vehicle lineup including hot new introductions such as the Mustang Mach-E battery electric crossover, new Ford Bronco (190K reservations), Bronco Sport, and upcoming F-150); (2) a refreshed F-150 has historically led to a substantial improvement in North American profitability, which we expect by 2Q21; (3) the “Bold Moves” Ford is taking to right-size its international operations, including most recently in South America, we think will free up capital for use in initiatives investors are likely to reward more, such as its electrification and autonomous efforts,” Brinkman wrote. In line…
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