RBC

3 Top Auto Stocks for 2022, According to RBC

We’re about to turn the page on the calendar, put 2021 behind us, and stride into the brave, new year of 2022 – and Wall Street’s prognosticators are busy scanning the stocks to find the winners and losers for next year’s markets. Whether it’s individual stocks, whole industry sectors, or some combination of both, the analysts are finding plenty of Buy-rated equities for investors to consider.

Take the automotive sector. Few industrials will present as many investment opportunities, both in 2022 and going forward; it’s an essential industry, and it’s in the midst of a sea-change as electric and alt-fuel drive technologies are expanding, and gasoline engines are falling out of social favor.

In coverage for RBC, analyst Joseph Spak sees the auto sector primed for a strong rebound post-COVID. He writes, “We believe the multi-year volume recovery backdrop driven by improvement in semiconductor and supply chain availability coupled with low inventories and improving schedule stability provides a solid backdrop for the suppliers.”

Spak acknowledges near-term volatility, of course. Semiconductor chips are still in short supply, and transport bottlenecks are still plaguing the industry, but consumer demand is rising, and credit should remain plentiful even if the Fed does implement a rate increase next year. All of this, in Spak’s view, adds up to a 2H22 weighting for improvements in automotive stocks.

Against this backdrop, the analyst is pounding the table on three auto stocks in particular, noting that each has the potential to deliver strong gains in the year ahead. We ran the names through TipRanks’ database to see what other Wall Street’s analysts have to say about them.

Rivian Automotive (RIVN)

We’ll start in the EV (electric vehicle) segment, with Rivian Automotive. This company, which has been in business since 2009, is working to develop a new platform to make efficient use of both the hardware and software sides of the emerging EV technology. The basic idea is to create a flexible chassis that includes a built-in electric drive system, with fittings for various battery units depending on need, and able to accept modification through body and seating installations.

It’s an ambitious plan. Rivian’s approach will support various vehicle types with a high level of parts interchangeability for ease of manufacture and cost control, while allowing customers to buy a strongly individualized vehicle. So far, Rivian has two vehicle models in prototype production development; their R1T is a light pickup truck, while their R1S is an SUV. Both use the common platform and can drive on- or off-road. The company has received approximately 71,000 pre-orders for the R1 from the US and Canada.

In addition to the two consumer-oriented models, Rivian is working in partnership with Amazon to develop an all-electric delivery van, optimized for urban environments. The initial order from Amazon will total 100,000 vehicles.

Rivian has been successfully raising funds in the past year, including a $2.65 billion funding round in January of this year and a $2.5 billion round in June.

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