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With solid progress on the COVID-19 vaccination front and substantial economic growth so far this year, auto manufacturers have witnessed a significant rise in sales in the first half of 2021. Given sustainability initiatives worldwide, the EV industry is expected to grow over an extended period. Hence, we think the shares of auto manufacturers, Tesla (TSLA) and Stellantis (STLA), whose shares have gained more than 6% in price in the past month, are well-positioned to move higher. So, let’s discuss.
The electric vehicles (EV) industry is expanding rapidly, bolstered by zero-emission initiatives worldwide. The near-term outlook for the EV industry seems to be bright, as governments around the globe place significant emphasis on accelerating EV production and sales to meet their sustainability targets. The EV market grew more than 40% during 2020, with a record 3 million EVs registered.
Furthermore, global EV sales rose by around 140% year-over-year in the first quarter of 2021. And auto manufacturers are now placing an emphasis on broadening their product portfolios and ramping up production to meet the increasing demand. The International Energy Agency (IEA) anticipates the EV industry will witness “healthy growth” during this decade.
The shares of two well-known players in the industry, Tesla, Inc. (TSLA) and Stellantis N.V. (STLA), have gained more than 6% in the past month and are poised to generate significant returns in the coming months also.
Tesla, Inc. (TSLA)
TSLA in Palo Alto, Calif., designs, develops, manufactures, leases, and sells electric vehicles and energy generation and storage systems globally. The company operates in two segments: Automotive and Energy Generation and Storage.
TSLA’s total revenue increased 98% year-over-year to $11.96 billion in its fiscal second quarter, ended June 30. Its income from operations grew 301% from its year-ago value to $1.31 billion, while its non-GAAP net income improved 258% year-over-year to $1.62 billion. The company’s non-GAAP EPS increased 230% year-over-year to $1.45.
Analysts expect TSLA’s revenues to increase 49.3% year-over-year to $13.10 billion in the current quarter, ending September 2021. A $1.38 consensus EPS estimate for the current quarter indicates an 81.6% rise from the same period last year. TSLA has an impressive earnings surprise history as well; it beat the consensus EPS estimates in three out of the trailing four quarters.
Over the past month, TSLA gained 6.5% to close yesterday’s trading session at $686.17. The stock gained 107.8% over the past year.
Stellantis N.V. (STLA)
Based in the Netherlands, STLA designs, engineers, manufactures, and sells passenger vehicles, pickup trucks, SUVs, and light commercial vehicles worldwide. It offers luxury, premium, and mainstream vehicles, as well as financial services, and parts and services, and also provides retail and dealer financing, leasing, and rental services.
On July 6, STLA announced its investment in Vauxhall’s Ellesmere Port manufacturing plant, which will become the first STLA plant to produce a solely battery-electric vehicle, in both commercial and passenger versions, by the end of next year. This is in line with the U.K. government’s decision to stop sales of pure petrol and diesel engine vehicles from 2030. The project is expected to garner significant returns for the company amid sustainability initiatives worldwide.
In May, STLA and Hon Hai Precision Industry Co., Ltd., together with its subsidiary FIH Mobile Ltd., formed a non-binding memorandum of understanding to form Mobile Drive, a joint venture aimed at accelerating development timelines to deliver innovative in-vehicle user experiences. Through this partnership, the company expects to push the boundaries in connected car technology and provide immersive digital experiences to its customers.
STLA’s net revenues increased 270.2% year-over-year to €72.61 billion ($85.55 billion) in the fiscal six months ended June 30. Its net profit stood at €5.80 billion ($6.83 billion), up 627.7% from the same period last year. Its cash flows from operating activities came in at €5.62 billion ($6.62 billion) over this period.
A $182.87 billion consensus revenue estimate for the fiscal period ending December 2021 indicates a 12.8% increase year-over-year. The Street expects the company’s EPS to rise 202.8% from the prior year to $4.02 in the ongoing year.
STLA gained 18.4% over the past month to close yesterday’s trading session at $21.68. The stock has gained 32.8% over the past six months.
TSLA shares fell $1.91 (-0.29%) in after-hours trading Tuesday. Year-to-date, TSLA has declined -5.66%, versus a 19.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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