The seemingly endless chaos sparked by the coronavirus crisis has bruised automotive shares, much like airline and cruise stocks, as all travel-related industries have come to a sudden halt amid the economic lockdowns.
However, two Wall Street analysts recently told Barron’s they have found eight auto-related stocks that think are worth buying.
“The miles-driven collapse has a big impact,” Baird analyst David Leiker told Barron’s. Leiker warned about demand for repair services. Miles driven around the country declined roughly 45% in March. “The second quarter [is] likely to see a larger decline,” wrote Leiker in a Tuesday research report.
Leiker still sees opportunity among car stocks and likes his “best growth” ideas, including Aptiv (APTV), Visteon (VC), and Gentex (GNTX). Aptiv and Visteon have exposure to the trends of vehicle sophistication, electrification and autonomous driving.
Meanwhile, Guggenheim analyst Ali Faghri sees automotive aftermarket stocks heating up as the U.S. economy recovers. The aftermarket is the industry term for everything that happens after a new car is driven off the dealer lot.
The aftermarket players “are defensive and have historically outperformed in recessionary backdrops,” wrote Faghri in a Tuesday research report. “These subsectors should also benefit from a quick normalization in driving trends.”
He recommends the used-car auction stocks Copart (CPRT) and IAA (IAA), as well as salvage company LKQ (LKQ).
Faghri also upgraded O’Reilly Automotive (ORLY) and Advance Auto Parts (AAP) Tuesday to the equivalent of “buy.”
However, data firm IHS Markit sharply lowered its 2020 forecast for global light vehicle sales on Tuesday and warned that the United States will take the biggest hit from the coronavirus pandemic.
IHS, which closely tracks automotive sales and production trends, said it expects global light vehicle sales to fall 22% to 70.3 million units in 2020, from prior estimates of a more than 12% drop, Reuters reported.
In the United States, where most states have allowed online purchases but inventories still remain high, the consultancy firm expects auto sales to fall 26.6% to 12.5 million units in 2020, compared with a year earlier.
Vehicle production largely remains shut down in April in North America as automakers have been forced to delay introductions or planned ramp-ups of several new vehicles.
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