Automotive giant Tesla, Inc. (TSLA) CEO Elon Musk and Twitter, Inc. (TWTR) are currently involved in a lawsuit, with Musk trying to get out of his agreement to acquire Twitter. The trial is set to begin on…
October 17, 2022, and with the momentum being with TWTR, Musk may need to sell more shares to TSLA to complete the acquisition, thereby increasing the potential downside risk for the stock.
Furthermore, yesterday, a fire broke out in the recycling plant of TSLA’s Gigafactory in Berlin. This comes roughly a week after a TSLA megapack battery installed at the storage facility of Pacific Gas & Electric Co (PCG) caught fire, leading to the disconnection of the facility from the grid.
TSLA’s shares have declined 7.4% over the past month and 31% year-to-date to close the last trading session at $276.01. Despite the recent decline, the stock is still trading at a frothy valuation of 64.7 times forward earnings.
On the other hand, the automotive industry is expected to enjoy sustained demand and ride the wave of increasing electrification. Furthermore, the CHIPS and Science Act should benefit automobile makers by strengthening manufacturing capabilities and supply chains.
According to a report by Mordor Intelligence, the North American automotive market is expected to grow at 6.6% CAGR to reach a valuation of $917.23 billion by 2027.
Hence, we suggest considering fundamentally strong automotive stocks Volkswagen AG (VWAGY) and Honda Motor Co., Ltd. (HMC), which have better growth prospects than TSLA.
Volkswagen AG (VWAGY)
VWAGY is a well-known automobile company based in Wolfsburg, Germany. It sells its automobiles in Europe, North America, South America, and Asia-Pacific. The company operates through four segments: Passenger cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services.
On September 26, it was announced that PowerCo, the new battery subsidiary of VWAGY and Umicore, founded a joint venture for European precursor and cathode material production.
Since active cathode materials are the most significant contributor to overall battery cost and key to a successful transition to electric mobility, this collaboration is expected to improve the company’s bottom line.
On September 5, VWAGY announced its…
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