Decline in Major U.S. Automotive Stocks Raises Concerns
As major U.S. automotive stocks experience a decline this week, investors are growing skeptical about future performance in the industry. Ford Motor, in particular, is leading the downward trend, with shares down more than 17% in early trading on Thursday. This marks the company’s worst decline since 2009. The disappointing results come as Ford missed Wall Street’s bottom-line earnings expectations due to recurring warranty problems, an issue that has plagued the company for some time.
General Motors (GM) and Stellantis, two other major players in the industry, also saw their shares drop after reporting their results this week. GM, although outperforming Wall Street’s expectations for the second quarter and increasing its guidance for the year, faced criticism from investors due to concerns about a slowdown in growth businesses and doubts about the automaker’s earnings power. Stellantis, on the other hand, reported “disappointing” first-half results, primarily due to ongoing issues in its North American operations. The company’s shares were down nearly 10%, trading near a 52-week low.
Despite these challenges, both Ford and Stellantis reconfirmed their 2024 guidance. Ford executives acknowledged the unexpected warranty costs that impacted their earnings per share expectations but remained optimistic about their underlying business operations. Similarly, Stellantis CEO Carlos Tavares highlighted the tough period the industry is facing and emphasized the need for hard work to deliver performance.
While Wall Street analysts expressed frustration over Ford’s recurring warranty costs, many still have faith in the company’s potential. In fact, Morgan Stanley’s Adam Jonas maintained Ford as the firm’s “top pick” and downgraded GM from overweight to equal weight, despite GM’s impressive quarter. Jonas sees more potential upside in Ford, albeit acknowledging the challenges the company is currently facing.
In the midst of the decline in traditional automakers’ stocks, electric vehicle (EV) leader Tesla also experienced a setback. Shares of Tesla closed down 12% on Wednesday after the company reported weaker-than-expected quarterly earnings and a decrease in automotive revenue. This decline followed Tesla’s largest daily drop since 2020 on Tuesday.
Overall, the decline in major U.S. automotive stocks reflects industrywide uncertainty, as well as individual issues faced by each company. While investors may be concerned about the short-term performance of these automakers, analysts remain cautiously optimistic about the long-term prospects of companies like Ford, emphasizing their ability to address challenges and adapt to the changing automotive landscape.
