What are the best automotive industry stocks to buy in February?

Written by: Stanko Iliev
January 31, 2021
  • Ford, General Motors, and Toyota remain attractive for long-term oriented investors
  • U.S. employment data will be one of the major events for the next trading week
  • Coronavirus contagions keep decreasing globally

The U.S. stock market weakened in January’s last trading week; Wall Street’s three main indexes closed sharply lower on Friday and registered their biggest weekly declines since October. The positive news is that coronavirus contagions keep decreasing globally but it is also important to say that vaccination progresses slower than expected.

Pfizer CEO said that “there is a high possibility that future variants will elude vaccines,” and this also negatively influenced financial markets. A new coronavirus variant discovered in South Africa has raised concerns because some vaccines do not show the same efficacy.

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Johnson & Johnson vaccine shows 66% efficacy four weeks after vaccination, but Dr. Paul Stoffels said that the vaccine effectively matters most: preventing hospitalizations and deaths.

“We showed that there was an 85% efficacy against severe disease and complete protection against hospitalization and complete protection against death. And that’s across all the regions, including in South Africa,” said Dr. Paul Stoffels, the chief scientific officer at Johnson & Johnson.

This is very important for the automotive industry because this industry has been affected significantly by the pandemic, and many automobile companies have seen revenues drop by double digits. I think Ford, General Motors, and Toyota face the current covid crisis relatively well, and these companies remain attractive for long-term oriented investors.

The U.S. will publish the Nonfarm Payrolls report on Friday, and this will be one of the major events for the next trading week. According to estimates, the U.S. could add 85K new jobs in January, but if the U.S. employment data fail to impress, that would add further pressure on the U.S. stock market.

Here we outline three automotive industry stocks that are likely to outperform the rest of the market in the short-term

Ford

Ford (NYSE: F)shares remain in the bull market, and the first sign of the trend reversal will be if the price falls below the $8 support level. This company is not overvalued, while Ford’s business has proven stability throughout the last year.

Data source: tradingview.com

JPMorgan boosted its 2022 EPS estimate on Ford to $1.35, and according to projection, the revenue could rise in 2021 to around $143 billion. If the price jumps above $11, it would be a signal to buy Ford shares, and the next target could be around $12 or even $13.

General Motors

General Motors (NYSE: GM)shares have advanced from $40 above $57 since the beginning of January, and the current price stands around $50. General Motors’ shares are currently a little overvalued, but they could advance again above $55 resistance.

Data source: tradingview.com

As long the price is above this trend line and $40 support, this stock is in the “buy” zone, and there is no indication of the trend reversal. If the price jumps above $55, it would be a signal to trade General Motors shares, and the next target could be around $60.

Toyota

Toyota announced that its annual global sales of electrified vehicles could reach 5.5M by 2025, and even in this pandemic environment, the business of Toyota is going well. The fundamentals of this company are excellent, and at the current share price, Toyota is still undervalued relative to the other automobile manufacturers.

Data source: tradingview.com

If the price jumps above $150, it would be a signal to buy shares, but if the price falls below $120, it would be a strong “sell” signal, and the next target could be around $100.

Summary

Ford, General Motors, and Toyota face the current covid crisis relatively well, and these companies remain attractive for long-term oriented investors. The U.S. will publish the Nonfarm Payrolls report on Friday, and this will be one of the major events for the next trading week.