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The automotive industry on Wednesday was upgraded to Attractive from a previous investment rating of In-Line by analysts at financial-services firm Morgan Stanley. They said makers of gas-powered cars and their suppliers are poised to deliver gains to shareholders.
“After years of peak spending on electric vehicles and autonomous vehicles, auto manufacturers are pivoting to capital efficiency and return,” Adam Jonas, analyst at Morgan Stanley, said in a March 13 report. “Over the past few months, we have seen auto demand trends strongly support our ICE [internal combustion engine] elongation thesis as well as management teams at legacy original equipment manufacturers largely receptive to our capital discipline and cash-return thesis.”
The firm sees the possibility for 10% gains on average for automotive stocks to reach its price targets, or 7% excluding electric-vehicle pioneer Tesla (NASDAQ:TSLA).
Morgan Stanley estimates this year will see a seasonally adjusted annualized rate of 16 million cars sold in the United States amid a decline in new-vehicle pricing.
“Without question, our highest conviction narrative in global autos is the opportunity to make profound improvements in capital efficiency,” according to the firm.
Ford Motor (NYSE:F) is Morgan Stanley’s top stock pick among U.S. carmakers “on the opportunity for capital discipline and shareholder return.”
The firm has a price target of $16 a share on Ford (F) for 32% upside. Ford's (F) stock rose as much as 3.1% on Wednesday, while the Standard & Poor's 500 stock index (SP500) traded in a narrow range.
Within Morgan Stanley's automotive-industry coverage, these stocks are weighted Overweight: