The Ferrari SP38 seen at Goodwood Festival of Speed 2022 on June twenty third in Chichester, England.
Martyn Lucy | Getty Images
This yr wasn’t about which auto manufacturer stock performed the perfect. It was about which stock managed to flee the worst of the yr’s selling pressure.
After significant growth in auto stocks in 2021, this yr proved daunting with the EV startup bubble popping, low vehicle inventories and rising rates of interest. That was along with fears of a recession and overall “demand destruction” for industry sales.
Most of the world’s largest automakers performed well financially this yr, however it wasn’t enough to offset the skin economic concerns that their most profitable days could also be behind them.
“We’re preparing for a difficult FY23 outlook for auto earnings on demand decline (higher rates), deflation (lower cost/mix) and unfavorable changes in the provision/demand balance for EVs,” Morgan Stanley analyst Adam Jonas wrote in an investor note earlier this month.
The FactSet Automotive Index, which incorporates automakers and aftermarket parts, is off about 38% to this point this yr, as of Tuesday’s close. All major automakers and EV startups experienced double-digit declines this yr – partially or completely offsetting their gains in 2021.
Many once-promising EV startups were amongst the largest losers, as some bumped into capital troubles or couldn’t scale production as quickly as anticipated. Rivian, Lucid, Canoo and Nikola experienced 76% declines or more yr to this point.
Traditional automakers were in a position to temper their stock declines higher than the EV startups. But America’s largest automakers – General Motors and Ford Motor – each experienced declines of greater than 40%, barring any surprise rally to finish the yr. Others corresponding to Stellantis, Nissan, Toyota and Volkswagen have declined greater than 25%.
Ferrari wins by losing the least
The corporate with the smallest decline was Ferrari, which yr to this point is barely down by about 18% − making it the yr’s best-performing automaker stock.
What drove that performance? For starters, the storied maker of high-end sports cars isn’t the same as other automakers: it’s expected to sell roughly 13,000 of its jewel-like sports cars by yr’s end − fewer than giants like General Motors sell in a day. But those coveted cars exit the door at a median selling price of around $322,000 each, based on FactSet estimates.
Even at those prices, the waiting list for a Ferrari is long. The corporate limits its annual production to preserve its pricing power and exclusivity, a pleased situation that provides Ferrari exceptionally strong profit margins and ensures that its factory is not prone to be idled anytime soon.
Most Ferrari models were sold out for the yr by early November, CEO Benedetto Vigna said during Ferrari’s third-quarter earnings call, and he anticipates no problem with demand in 2023 – irrespective of how the world’s economies behave.
Vigna has good reasons for that view. Ferrari has several latest models on the approach to keep that waiting list long, including its first SUV-like vehicle, a sleek V12-powered four-door called the Purosangue that starts at about $400,000 within the U.S. Even at that price – and even for a four-door Ferrari – demand is brisk. Although Ferarri won’t even begin shipping the Purosangue for a couple of months yet, the corporate temporarily stopped taking orders last month after it sold out the primary two years of production.
“The corporate’s deal with the unique quality and performance of its vehicles is unwavering, and has driven a track record of resilient financial performance, in addition to significant intangible brand value and a real luxury status,” BofA Securities analyst John Murphy told investors in a Dec. 13 note, reiterating a buy rating on Ferrari and a $285 price goal.
The Tesla story
Then there’s Tesla, which has proven to be among the best automotive stocks for investors in recent times because of its tech-like valuation from Wall Street. Shares of the EV maker have plummeted greater than 68% yr to this point.
Much of the decline in Tesla shares has come since CEO Elon Musk acquired social media platform Twitter. The stock is down greater than 50% because the deal closed Oct. 27.
“We consider increasing negative sentiment on Twitter could linger long run, limiting its financial performance and develop into an ongoing overhang on TSLA,” Oppenheimer analyst Colin Rusch wrote in a note this month downgrading shares to perform from outperform.
Wall Street analysts expect 2023 to be one other choppy yr for automotive stocks. Here’s how legacy automakers, in addition to top emerging EV startups, have performed this yr.
- Ferrari (RACE): -18%
- Stellantis (STLA): -25%
- Toyota (TM): -26%
- Nissan (NSANY): -35%
- General Motors (GM): -43%
- VW (VWAGY): -46%
- Ford (F): -46%
- Fisker (FSR): -57%
- Tesla (TSLA): -68%
- Nio (NIO): -68%
- Lordstown (RIDE): -69%
- Nikola (NKLA): -75%
- Rivian (RIVN): -82%
- Lucid (LCID): -83%
- Canoo (GOEV): -86%
– CNBC’s Michael Bloom contributed to this report.
