- (0:45) - The Perfect Storm Hits The Automotive Market
- (3:45) - How Will This Impact The Automotive Rental Businesses?
- (10:50) - Car Manufactures and Dealerships
- (21:25) - Stocks To Watch In The Auto Sector
- (30:00) - Will It Get Worse For The Automotive Sector?
- (39:10) - Episode Roundup: HTZ, CAR, LAD, PAG, GM, F, CVNA, RACE, TSLA
Welcome to Episode #225 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is joined by Zacks Stock Strategist, David Bartosiak, who is also the editor of Zacks Blockchain Innovator and Surprise Trader newsletter portfolios, to discuss one of their favorite topics: the auto industry.
The coronavirus is impacting all aspects of the auto industry from manufacturing, to the auto dealerships, to the rental car companies.
Are there any buying opportunities among the stocks?
Business Travel Plunges
With the global economy shutdown, nearly all companies are keeping their road warriors at home. That means there’s no business travel and few are renting cars at the airports.
The rental car companies buy 10% of US autos a year, or about 1.7 million cars.
Hertz HTZ is trying to stay out of bankruptcy. It has a May 22, 2020 deadline to get financing.
Avis Budget CAR saw an 80% decline in sales in April and will burn through $800 million between April and June.
Who Will Win Among the Manufacturers?
Maybe a better investing opportunity is in the auto manufacturers.
1. Ford F shares are down 48% year-to-date but it no longer has a P/E as earnings are expected to decline $1.44. It’s famous trucks usually do well when the economy is strong, but not so well when it’s not.
2. Tesla TSLA shares are up 100% in 2020. It’s been on fire. But it’s not cheap. Tesla now has a forward P/E of 176. Estimates have been cut but earnings are still expected to be positive in 2020 and 2021. Dave says it’s not a car company. It’s a tech company. Are you willing to pay 176x for it?
3. Ferrari RACE shares have rebounded off their 2020 lows and are now down just 4% year-to-date. While earnings estimates are also being cut for 2020 as its Italian factory was shut due to the coronavirus, it’s not cheap. It trades with a forward P/E of 54.
What about the auto dealers? Are there some bargains there?
Find out the answer to this and more on this week’s podcast.
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Ford Motor Company (F): Free Stock Analysis Report
Avis Budget Group, Inc. (CAR): Free Stock Analysis Report
Hertz Global Holdings, Inc (HTZ): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Ferrari N.V. (RACE): Free Stock Analysis Report
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