The automotive industry has been surprisingly resilient despite facing over a year's worth of roadblocks, most recently the global semiconductor shortage, which has impaired supply chains, BofA Securities analyst John Murphy said in a Friday note.
The bank has favorable second-quarter earnings estimates for a handful of new and legacy automakers, attributing the positive outlook to a "favorable price/mix and better execution/ mitigation of chip shortage headwinds," the analyst said.
Taking these second-quarter trends into account, Murphy made the following changes:
- Ford Motor Co. F: Increase price target from $17 to $18, and increase second-quarter EPS estimate from $(0.40) to $(0.20)
- General Motors Co. GM: Increase price target from $80 to $90, and increase second-quarter EPS estimate from 40 cents to $2.
- Tesla, Inc. TSLA: Increase price target from $700 to $750, and maintain 90-cent second-quarter EPS estimate.
- BofA has a Buy rating on GM and Ford and a Neutral rating on Tesla.
Related Link: As Hip EV Startups Tesla, Nio Struggled, Legacy Automakers Ford, GM Gave Stellar Returns In 2021 First-Half
The Ford Takeaways: The $18 price target is based on a 5x EV/EBITDA multiple on an average of 2021 and 2022 estimates, said Murphy.
Though the multiple choice is at the high end of Ford's historical range of 3x-6x, the analyst said Dearborn is in a growth cycle.
The company is driving revenue by strengthening its core business lines to stay on top of the future of the automotive industry, he said.
The GM Takeaways: The $90 price target is based on a 6x EV/EBITDA multiple on an average of 2021 and 2022 estimates, said Murphy.
Similarly to Ford, this multiple is on the high end of GM's historical range of 3x-6x, the analyst said.
Supporting this higher multiple is GM's well-managed business, which is escalating its focus on the future by investing in an autonomous EV fleet through Cruise Automation and Chevy Bolt, car-sharing through Maven and connectivity through OnStar, he said.
The Tesla Takeaways: The $750 price target is based on a 98x EV/EBITDA multiple on an average of 2021 and 2022 estimates, said Murphy.
Since Tesla is a far newer automotive player relative to legacy OEMs like Ford and GM, the company currently and historically has been ascribed an incredibly high multiple by the market, said the analyst.
The high multiple is supported by Telsa's "track record of growth, consistent capital raises, and overall investor hype," he said.
Price Action: At the close Friday:
- F: Ford was down 2.86% at $13.61.
- GM: General Motors was down 2.62% to $55.46.
- TSLA: Tesla was down 0.98% to $644.22.
Related Link: The Best And Worst Possible Outcomes From The EV Revolution
Photo: courtesy of Ford.
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