In this article, we will discuss analyst Itay Michaeli’s 8 auto stocks at Citi that have a bullish stance. If you want to skip our discussion of the outlook for the automotive industry, go directly to This analyst is bullish on 4 auto stocks for the rest of 2022.
In a research note published Aug. 2, Citi’s Itay Michaeli raised EPS estimates for several auto stocks as we head into the second half of 2022. He cited the rise in optimism in the tone of the management when calling those companies’ second quarter 2022 results as a reason to raise its guidance. Michaeli added that the reiteration of guidance and the resilience of demand in the U.S. auto sector were expected during the earnings call. However, the optimism in the European auto market displayed by the management of various automakers came as a surprise, given the economic uncertainty and supply chain issues. He predicts that optimism sentiment will flow to investors and drive the automotive sector to outperform the broader market in 2022. After pricing in the impact of positive developments, the analyst raised target prices for notable companies like Ford Motor Company (NYSE:F), Tesla, Inc. (NASDAQ:TSLA), and Visteon Corporation (NASDAQ:resume).
The automotive industry has undergone substantial change as it strives to meet rising consumer expectations and overcome barriers related to autonomous, electric and hybrid vehicles. The international automotive industry has recovered from the setbacks caused by the pandemic with a respectable 5.3% increase in sales in 2021. The industry is going through a transformation as the focus shifts from conventional fuel vehicles to vehicles electricity to reduce the negative impact on the environment.
EV Revolution
According to Bloomberg Data, global electric vehicle sales beat expectations last year. Between 2020 and 2021, sales nearly doubled to 6.6 million units. By 2030, sales are expected to reach 32 million units per year. From 2011 to 2021, sales of electric vehicles have increased 174 times globally. During the same period, sales of electric vehicles in the United States have increased 38 times. In addition, the sale of automotive accessories and spare parts online is expected to reach $50 billion worldwide in 2022. The aftermarket will see an increase in demand for specialist services and equipment maintenance due to the increase in the number of electric vehicles.
There are, however, important limitations to these optimistic predictions. Consumer demand appears to be obvious, but before EV manufacturing and sales can expand, the auto industry needs to move quickly to remove key barriers. These include strained supply chains as a result of the Russian-Ukrainian conflict, a shortage of battery production gigafactories, insufficient productivity in existing facilities, and a lack of infrastructure for public charging.
Michaeli’s position on Tesla, Inc. (NASDAQ: TSLA)
We’d also like to highlight Michaeli’s contrarian appeal to one of the world’s leading electric vehicle producers, Tesla, Inc. (NASDAQ: TSLA). Although the analyst raised Tesla, Inc.’s (NASDAQ:TSLA) price target from $375 to $425, he still maintained a sell rating on the stock. The target price reflects a potential decline of more than 50% from the August 5 closing price. The analyst raised EPS guidance for the second half of the year after the company’s second-quarter 2022 earnings were beaten due to strong execution.
However, Michaeli believes the valuation of Tesla, Inc. (NASDAQ:TSLA) “remains in dispute.” He stressed that his investment thesis would only change if he saw more concrete evidence of progress in rolling out Level 4 autonomy and RoboTaxi. Level 4 driving autonomy is considered High Driving Automation. This means that in the event of a problem, the artificial intelligence (AI) embedded in the automobile will be able to intervene on its own without the need for human assistance in the majority of cases. However, a human can also override manually. According to Elon Musk, CEO of Tesla, Inc. (NASDAQ:TSLA), RoboTaxi’s self-driving service will be a combination of Uber Technologies, Inc. (NYSE:UBER) and Airbnb, Inc. (NASDAQ:ABNB). Musk also added that RoboTaxi is not designed with a launch city in mind, but it would be a general solution that could work across the planet.
picture by Marvin Meyer on Unsplash
Our Methodology
Let’s start our list of eight auto stocks that Michaeli has a bullish position on. We will review the analyst’s remarks and discuss the growth drivers of these companies. The stocks were ranked by the number of hedge fund holders in the first quarter of 2022.
8. Polestar Automotive Holding UK PLC (NASDAQ:PSNY)
Polestar Automotive Holding UK PLC (NASDAQ:PSNY) went public on June 24 via a SPAC agreement. Trading in the shares began a day after the successful merger with SPAC Gores Guggenheim.
The electric vehicle maker intends to use the $890 million raised from the IPO to fund its operations over the next three years as the company seeks to design and manufacture new vehicle models electricity and achieve profitability. Polestar Automotive Holding UK PLC (NASDAQ:PSNY) was formed in 2017 as a joint venture between Swedish automaker Volvo and Chinese auto giant Geely. The company consolidated its operations and prepared for the hyper-growth phase before exiting to raise capital.
Michaeli initiated a hedge on Polestar Automotive Holding UK PLC (NASDAQ:PSNY) with a buy and high risk rating and a target price of $13. The analyst expects the company to gain nearly 6% global market share by 2030. Michaeli also favored the asset-light model of Polestar Automotive Holding UK PLC (NASDAQ:PSNY) in because of the presence of strong partners.
While the analyst presented a positive outlook on Polestar Automotive Holding UK PLC (NASDAQ:PSNY) stock, he also pointed to some expected headwinds. Fluctuations in exchange rates and volatility in commodity prices and supply could adversely impact the operations of Polestar Automotive Holding UK PLC (NASDAQ: PSNY) in the future.
7. Fisker Inc. (NYSE:FSR)
Number of hedge fund holders: 16
Fisker Inc. (NYSE: FSR) is an electric vehicle manufacturer based in Manhattan Beach, California. The company was founded and is managed by renowned automotive designer Henrik Fisker and his wife Geeta Gupta-Fisker.
In a research note released Aug. 4, Michaeli raised the price target on Fisker Inc. (NYSE:FSR) from $27 to $28 and maintained a buy rating on the stock. The analyst pointed out that he found no unexpected updates in the company’s “pretty encouraging” results for the second quarter of 2022. He also added that at the current valuation, the setup works in favor of Fisker Inc. (NYSE:FSR) as the company moves toward major milestones.
Industry experts believe Fisker Inc. (NYSE:FSR) may need a cash injection over the next six months to execute the Ocean ramp plan, which involves ramping up production of the all-electric Fisker Ocean SUV. However, this may be difficult to achieve as rising interest rates and growth concerns have made it difficult to access new capital. There is also short-term execution risk hanging over the company as all of its production is based in Austria, and the country could face the brunt of the gas shortage in Europe.
Moore Global Investments was the top hedge fund investor in Fisker Inc. (NYSE:FSR) during the first quarter of 2022.
6. Lucid Group, Inc. (NASDAQ:LCID)
Number of hedge fund holders: 16
Lucid Group, Inc. (NASDAQ: LCID) is a luxury electric vehicle company based in Newark, California. The company is led by CEO Peter Rawlinson. He was the former chief engineer of the Tesla Model S.
Although the company reported weak second-quarter 2022 results on Aug. 3, the Citi analyst reiterated its buy rating on Lucid Group, Inc. (NASDAQ:LCID) stock with a target price of 28 $. Lucid Group, Inc. (NASDAQ:LCID) reported disappointing results as supply chain constraints at its Casa Grande plant near Phoenix, Arizona weighed on quarterly results. These developments have caused the company to lower its 2022 production forecast to just 6,000 to 7,000 units, down from the previous forecast of 12,000 to 14,000 units.
However, experts consider Lucid Group, Inc. (NASDAQ: LCID) to be one of the strongest electric vehicle players outside of China that could survive in a tough macroeconomic environment. The luxurious Lucid Air has the longest range of 517 miles with the most efficient battery.
Of the 912 hedge funds tracked by Insider Monkey at the end of the first quarter of 2022, 16 funds held a stake in Lucid Group, Inc. (NASDAQ: LCID).
5. Luminar Technologies, Inc. (NASDAQ:LAZR)
Number of hedge fund holders: 16
Luminar Technologies, Inc. (NASDAQ: LAZR) is an Orlando, Florida-based provider of automotive safety and autonomous driving products and technologies.
Michaeli gave Luminar Technologies, Inc. (NASDAQ:LAZR) stock a buy rating with a target price of $24 on May 6. The analyst believes Luminar Technologies, Inc. (NASDAQ:LAZR) qualifies as a long-term investment. It has the first engine advantage in key light detection and ranging (LiDAR) technology that is integral to sensing technology for advancing autonomous driving.
The company released its second quarter 2022 results on August 8. Luminar Technologies, Inc. (NASDAQ: LAZR) reported revenue of $9.9 million, beating analyst estimates of $8.59 million. Additionally, the company raised its FY22 guidance for its prospective backlog to a 60% year-over-year growth rate from a previous guidance of 40%.
Founder and CEO Austin Russel is the largest shareholder of Luminar Technologies, Inc. (NASDAQ: LAZR), with a stake of over 38%.
Besides Luminar Technologies, Inc. (NASDAQ:LAZR) and Visteon Corporation (NASDAQ:VC), Michaeli also has a positive view of Ford Motor Company (NYSE:F).
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