Bank of America Highlights Ferrari, Aptiv and AutoNation as Top Auto Stocks for 2025 - Tesla (NASDAQ:TSLA

Bank of America has identified three key auto stocks it expects to outperform in 2025: Ferrari PLC (RACE), Aptiv Inc. (NYSE:APTV) and AutoNation Inc. (NYSE:AN). The firm notes that these companies are well-positioned to benefit from ongoing trends in the automotive industry, despite recent volatility and sector-specific challenges.

Ferrari (RACE): Resilient Luxury and Brand Power

Ferrari’s shares increased by 26% in 2024, climbing from $338 at the end of 2023 to $425 by the close of 2024. Bank of America analysts maintain a “Buy” rating on Ferrari, emphasizing its positioning as a luxury automaker with significant brand value. The company’s strategy of balancing restrained production growth, price increases and new model rollouts is expected to sustain consistent revenue and earnings growth.

The launch of the F80 in late 2025 and the HyperCar in late 2026 are anticipated to enhance Ferrari’s product mix, alongside improvements in its racing performance. The firm highlights Ferrari’s ability to differentiate its vehicles and maintain operational efficiency, noting that its financial outlook remains conservative. Analysts believe Ferrari’s earnings resilience in uncertain macroeconomic conditions is a key strength that will drive its stock performance in the coming year.

Aptiv (APTV): Positioned for a Rebound
Aptiv saw its stock price fall 33%, from $90 at the end of 2023 to $60 by the end of 2024. Despite this drop, Bank of America analysts see a recovery opportunity and maintain a “Buy” rating on the stock. The decline was primarily driven by a slowdown in EV sales, increased competition from Chinese automakers, and reduced production volumes among key customers.

However, analysts at BofA argue that these headwinds are temporary. The company’s expertise in vehicle architecture and connectivity aligns with automakers’ efforts to simplify manufacturing processes. Bank of America expects Aptiv's growth rate to reaccelerate between 2026 and 2027, leading to stronger earnings and valuation recovery.

AutoNation (AN): Capitalizing on Industry Momentum
AutoNation’s stock gained 13% in 2024, rising from $150 to $170. Bank of America analysts view the company favorably, citing its structural improvements since the pandemic and its ability to generate strong free cash flow. This financial strength enables AutoNation to reinvest in business initiatives, buy back shares and benefit from the ongoing recovery in U.S. new vehicle sales.

The analysts expect that new vehicle gross profit per unit will stabilize at elevated levels by the end of 2025 or 2026, supporting AutoNation’s earnings momentum. Furthermore, the company's SG&A leverage is expected to remain strong. Despite these positives, AutoNation is trading at a discount compared to its historical average and its peers, with a next-12-month price-to-earnings ratio of approximately 9.2x versus a historical average of 13x. Analysts believe this undervaluation provides a compelling investment case.

Sector-Wide Insights: Bank of America notes that vehicle payments as a percentage of disposable income are within affordable levels, while both new and used vehicle prices have stabilized. The constrained supply of late-model used vehicles should further support pricing. Analysts also highlight the necessity for consolidation within the automotive industry, given challenges like overcapacity and the transition to electric and autonomous vehicles.

The firm predicts that autonomous vehicle progress will drive the need for federal regulatory frameworks to streamline development and deployment. This regulatory clarity could help foster broader adoption of the technology.

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