Best Automotive Stocks To Buy In May

Key Insights

• Tesla will be an interesting rebound play in case the situation with coronavirus in China stabilizes. 
• Ford is trading at just 6 forward P/E, which is attractive for value-oriented traders. 
• The general market is trying to rebound, which could provide additional support to automotive stocks. 

S&P 500 has recently moved away from yearly lows, but many stocks remain under material pressure. The stocks in the automotive industry are not an exception as traders are worried that higher costs and potential slowdown of the world economy would hurt automakers’ profits. That said, some automotive stocks are trading at attractive valuation levels that have not been seen for quite some time.

Tesla

Tesla stock has recently found itself under significant pressure due to lockdowns in China. Musk’s desire to buy Twitter has also hurt investor sentiment, although the recent news indicated that the fate of the deal remained uncertain.

Meanwhile, analyst estimates have moved higher in recent months. Currently, Tesla is expected to report a profit of $12.32 per share in 2022 and earnings of $15.8 per share in 2023, so the stock is trading at 47 forward P/E.

Such valuation levels are not cheap for an “ordinary” stock, but Tesla is not an ordinary company. At this point, it looks that demand for the stock may increase in the upcoming weeks in case the situation with coronavirus in China stabilizes after the lockdowns.

Ford

Ford stock is extremely cheap compared to Tesla. The company is expected to report earnings of $2.18 per share in the next year, so the stock is trading at just 6 forward P/E.

However, it should be noted that shares of legacy automakers have traded at a huge discount to Tesla for years, so the relative cheapness of Ford stock cannot serve as the main catalyst for the bulls.

However, Ford is also cheap on an absolute basis. It is not easy to see a world-class company valued at just six times its future profits nowadays. Analyst estimates have been trending lower in recent months, which partly explains traders’ skepticism, but current levels should still attract value-oriented investors.

To keep up with the latest earnings updates, visit our earnings calendar.