US auto industry in the midst of a once fabled ‘V-shaped recovery’: JPMorgan

The US auto market is bouncing back nearly as fast as it fell, making the hope of a V-shaped recovery real.

The rebound has prompted JPMorgan to raise its 2020 US light vehicle seasonally adjusted annual sales rate (SAAR) by one million, to 14.5 million. (Representational photo) (REUTERS)
The rebound has prompted JPMorgan to raise its 2020 US light vehicle seasonally adjusted annual sales rate (SAAR) by one million, to 14.5 million. (Representational photo)

New vehicle sales and used vehicle prices are recovering in May and June almost as fast as they declined in March and April, according to JPMorgan. “We didn’t call it, nor did we expect it, but numerous data points all suggest the US auto industry is in the midst of a once fabled but clearly no longer mythical ‘V-shaped recovery,’" JPMorgan analyst Ryan Brinkman wrote in a report.

That rebound prompted JPMorgan to raise its 2020 US light vehicle seasonally adjusted annual sales rate (SAAR) -- a closely watched sales measure -- by one million, to 14.5 million. The figure, materially above implied estimates from IHS Automotive of 13.2 million, also pushed JPMorgan to raise earnings per share estimates for automakers and suppliers, and led to higher price targets for Tesla Inc., General Motors Co. and Ferrari NV.

Trending Cars

Find more Cars

Also Read : SUVs and trucks solidify command of recovering US auto market

“The comeback in sales and prices has been faster than most anyone presumed," Brinkman said. “And because the shutdown of production lasted as long as it did amidst the more resilient than expected demand, inventories are now lean (even sparse), supporting an even sharper rebound in production, which comes as a relief to the entire supply chain."

Brinkman prefers General Motors to Ford because of its greater geographic exposure to North America and China, as a percentage of total sales. In addition, General Motors offers a “superior margin and [free cash flow] profile." The analyst raised the price target on GM to $33 from $29, and repeated an overweight rating on the shares. At the same time, Brinkman raised his price-target on the neutral-rated Ford, citing a chance that the shares may look more attractive in the second half as liquidity concerns fade.

Also Read : US auto suppliers cheer as carmakers relaunch, but long-term worries remain

Tesla’s price target was also raised, to $275 from $240, though Brinkman continues to rate the stock underweight due to rich valuations. Ferrari’s price target was raised to $145 from $133 following a better-than-expected recovery in sales after a Covid-19-induced slump. JPMorgan maintained its neutral rating on Ferrari, also citing valuations.

First Published Date: 20 Jun 2020, 09:44 AM IST
Shopping Bag Shop Now
74% OFF
Microfiber Car Cleaning Soft Brush Ideal as Mop Duster, Washing Brush with Long Handle, Dust Cleaner Car Wash Brush with Handle, Soft Brush Scratch Free, Cleaning Dashboard Curved Design - Grey
Rs. 389 Rs. 1,499
73% OFF
IDELLA Car Duster, Extendable Long Handle Microfiber Car Duster Exterior Scratch Free Car Cleaning Tool, Car Dust Brush for Truck, Pickup, SUV, RV, Motorcycle, Vehicles Cleaning,(Multicolor)
Rs. 239 Rs. 899
1% OFF
GOODAIR Clear Car Windshield Enhancer | Classic |12 Tablets
Rs. 295 Rs. 299
55% OFF
Antson Portable High Power 2 in 1 Car Vacuum Cleaner | USB Rechargeable Wireless Handheld Car Vacuum Cleaner Traveling, Camping Reusable and Sustainable, Portable,Rechargeable Vacuum (2 in 1)
Rs. 899 Rs. 1,999

Please provide your details to get Personalized Offers on

Choose city
+91 | Choose city
Choose city
Choose city
Powered by: Acko Logo
Please be noted that any information provided herein above will be received by Acko General Insurance Limited (“Acko”). By mentioning the above information, you agree to provide these details and information to Acko.
By clicking "View Offers" you Agree to our Terms and Privacy Policy

Dear Name

Please verify your mobile number.

+91 | Choose city
Couldn't verify the OTP.
It's either expired or it's incorrect.