Tesla (NASDAQ:TSLA) threw investors for a loop as shares crashed at the end of 2022 and started 2023 in a near-state of free-fall. However, its robust recovery has investors searching for the best auto stocks for 2023. Specifically, they are looking for auto stocks with innovation and technology in electric vehicles (EVs).
I’m not sure when it happened or if anyone could identify a single turning point, but now seemingly every automaker is focused on EVs, autonomous vehicles and everything in between.
Even the non-EV cars on the road today have turned into giant computer boards loaded with chips and technology. It’s a bigger risk to have to replace them than the classic components on our vehicles. Further, seemingly every automaker, new and old, is vying for a position in the EV market.
Let’s take a closer look at auto stocks with a competitive advantage and market share in EVs.
Tesla (TSLA)
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Tesla (NASDAQ:TSLA) is the leader of EV stocks and there’s no other way to say it. It’s the dominant leader in the space and it’s the best-performing EV stock of the bunch. In fact, many other EV and automaker stocks have really struggled so far this year, while Tesla stock has enjoyed a monstrous rally off the lows.
That said, it hasn’t necessarily been a smooth ride for Tesla. Shares collapsed in the second half of 2022 and continued to fall to start 2023. At the end of the day, Tesla stock suffered a peak-to-trough decline of 75%.
While shares have been volatile, the wipeout created a reasonable opportunity for long-term investors. The stock has struggled since reporting earnings in mid-April and if that weakness continues, I would think it again creates a long-term opportunity for investors, particularly if we retest the 2023 lows near $100.
Analysts expect 24% sales growth this year and 28% growth in 2024. However, the problem is margins, as analysts now forecast a 12.5% decline in earnings this year. That’s followed by estimates of 39% growth in 2024, but investors are readjusting their expectations for the current year.
Ford (F)
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Ford (NYSE:F) doesn’t get enough credit as one of the top EV stocks. Despite making serious strides in the EV space, many investors still think of it as an old-school automaker.
That’s despite launching the Mustang Mach-E, as well as electrifying the F-Series pickup. It’s worth mentioning that the F-Series pickup is the best-selling vehicle in the US. It was a huge gamble and it’s paying off big-time for Ford.
Just a month ago, Electrek wrote, “Ford Motor Company continues to bolster its EV production infrastructure to try and keep up with the tremendous demand for its F-150 Lightning pickup, which still remains sold out for many prospective buyers.”
Consensus estimates call for steady sales growth, while shares trade at 7.6 times this year’s earnings estimates and pay out a dividend yield of more than 5%. That said, auto stocks are likely going to suffer if a recession comes to fruition.
Ferrari (RACE)
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I have loved Ferrari (NYSE:RACE) since it came public just a few years ago. That said, it’s hard not to like this company. Not only does it make some of the greatest cars in the industry, it runs a fantastic business.
Demand almost always outstrips supply. In 2022, the company set a new sales record despite a volatile market and scary economic backdrop. Ferrari is not as cyclical as most other automakers, given the net worth of its typical customer.
Earlier this month, the company indicated “a record order book extending into 2024.” When it reported earnings in February, management said, “let’s focus on our future, our order book. We continue to enjoy strong demand across all regions, with an overall order portfolio continuing to be at an all-time high and covering well into 2024.”
So where does that all fit into the EV stocks? The company plans to enter the EV market in 2025, with more than 40% of its sales coming from the EV space by 2030. For a high-quality business like this, it’s hard to dislike the long-term potential of Ferrari.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
