Year 2022 has been a mixed bag for the auto space. While the demand for cars managed to remain strong, parts shortage (a byproduct of COVID-19 that got worsened by the Russia-Ukraine war) choked supplies and low stockpiles impacted sales. Even though historically low new-vehicle inventories had been a thorn in the side of the sector, automakers found relief in affluent car shoppers ready to pay a hefty price for vehicles. As the curtains roll down on 2022, one set of challenges seems to be replaced by another. We know that inventory levels are finally picking up as supply chain snafus are gradually starting to ease. While improving inventory levels should help meet pent-up demand through 2023, rising interest rates and uncertain economic conditions might play spoilsports.
Vehicle affordability is now emerging as one of the primary concerns, affecting the demand and sales of automakers. The industry, being highly cyclical, is likely to bear the brunt of the economic slowdown triggered by stubborn inflation and high interest rates. Rising COVID-19 cases globally, especially in the country of origin, will only complicate matters.
In light of a potential economic slowdown and recession, the road ahead for the auto sector looks uncertain. But if you wish to stay invested in the space and don’t want to break the bank, auto stocks priced below $10/share with a solid Zacks Rank and robust average broker rating should be good candidates for investing. Stocks like CarParts.com PRTS, Lion Electric LEV and AEye Inc. LIDR fit the bill.
Time to Invest in Broker-Favorite Stocks Trading Under $10
Market volatility has been the byword in 2022. With Fed maintaining its hawkish stance—signaling more rate hikes in 2023 and no cuts till 2024—to rein in the stubborn inflation, recessionary fears loom large. The wave of market volatility is expected to persist through next year as well.
In this jittery environment, why not target low-priced stocks offering good prospects? Of course, investing in stocks below $10/share does come with its share of risks. Investors are less likely to have heard of these companies. These under $10 stocks are also inherently more speculative than many other higher-priced stocks. Many such stocks may have weak underlying business models or glum near-term outlook. But with thorough research, investors can ferret out companies with strong fundamentals and manage to fetch impressive returns on a relatively small initial investment.
However, the stomach-churning volatility might make it difficult for investors to pick solid stocks independently. At this stage, one can pay heed to the expert opinion and pick broker-favorite stocks. As brokers directly communicate with top management, they have a deeper understanding into what is happening in a particular company. They meticulously assess companies’ publicly available documents and even attend conference calls. They have a better understanding of the overall sector and industry and place company fundamentals against the current economic backdrop to determine how a particular stock will fare as an investment.
With the help of the Zacks Stock Screener, we have highlighted three auto stocks priced below $10 with a solid Zacks Rank. Moreover, these stocks carry an average brokerage recommendation (ABR) in the range of <=2. ABR is the calculated average of actual recommendations made by brokerage firms on a scale of 1 to 5 (Strong Buy to Strong Sell) and indicates the future potential of the stock.
CarParts.com: Headquartered in California, CarParts.com offers an e-commerce automotive aftermarket, providing collision, engine and performance parts and accessories. The firm’s CEO David Meniane’s sharp focus on operational discipline is bearing fruits. CarParts.com has been successfully passing the rising costs of raw materials to customers through smart pricing actions. Expanded capacity at its Grand Prairie distribution center has not just boosted the inventory of brand partners but also created more space for CarParts.com’s premium brands like TrueDrive, DriveWire, DriveMotive, JC Whitney and the SureStop brake product line.
PRTS sports a Zacks Rank #1 (Strong Buy). It is currently trading at around $5.70 and has an ABR of 1.33. The Zacks Consensus Estimate for the company’s 2023 loss has narrowed 7 cents in the past 60 days. The consensus mark for 2023 sales implies year-over-year growth of 12.2%.
Lion Electric: Headquartered in Montreal, Lion Electric is a manufacturer of all-electric medium and heavy-duty urban vehicles. Its order book of 2,408 all-electric medium- and heavy-duty urban vehicles (as of Nov 9) represents a total order value of more than $575 million and positions it well to carve out a strong share in the growing electric bus market. Last week, the company completed the production of its first lithium battery pack at Mirabel facility. The batteries will power the Lion5 truck and the LionAmbulance, which are set for commercial production in the first half of 2023. The firm’s Joliet facility is anticipated to have an annual production capacity of 20,000 medium and heavy-duty vehicles at full scale.
LEV carries a Zacks Rank #2 (Buy). It is currently trading at around $2 and has an ABR of 1.69. The Zacks Consensus Estimate for the company’s 2023 loss has narrowed 7 cents in the past 60 days. The consensus mark for 2023 sales implies year-over-year growth of 12.2%.
AEye: AEye is a premier provider of LIDAR for vehicle autonomy, advanced driver-assistance systems and robotic vision applications. AEye’s iDAR (TM) system leverages biomimicry and principles from automated targeting applications. The company expects multiple design wins in the coming months, which should drive AEye prospects. Partnership with Samina, deal with Tu Simple and Intetra augur well. 4Sight, AEye’s breakthrough lidar sensor, delivers automotive solid-state reliability and record-breaking performance, providing the company a competitive edge. Continental, a tech company, is the lead customer of AEye for automotive lidar, having integrated the AEye sensor into its sensor suite, including radar, camera and perception software.
LIDR carries a Zacks Rank #2 (Buy). It is currently trading at around 50 cents and has an ABR of 1.67. The Zacks Consensus Estimate for the company’s 2023 loss has narrowed 12 cents in the past 60 days. The consensus mark for 2023 sales implies a year-over-year jump of 497%.
You can see the complete list of today’s Zacks #1 Rank stocks here
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