Along with the broad market correction, auto stocks have declined in 2022. The S&P 500 Automobile Manufacturers Sub Industry Index hascorrected by more than 20% during this period. This correction presents a good opportunity to accumulate some undervalued auto stocks.
The industry faces near-term headwinds that include inflation and a possible recession. Supply chain challenges have also impacted the auto industry. However, the long-term outlook remains robust. This is particularly true as the electric vehicle segment continues to grow at a healthy pace.
It’s worth noting that the global automotive market is expected togrow at a CAGR of 3.7% through 2030. For the same period, the electric vehicle market is expected togrow at a CAGR of 21.7%. It’s not surprising that traditional automakers are making a big shift toward electric vehicles.
With impending growth opportunities, it’s a good time to accumulate some undervalued auto stocks. My focus is on pure-play electric vehicle companies as well as traditional automakers that are positioned for growth.
Undervalued Auto Stocks: Rivian Automotive (RIVN)
Rivian(NASDAQ:RIVN) has surged roughly 100% from 2022 lows near $19.30. However, RIVN stock remains undervalued from a long-term perspective.
For Q2 2022, Riviandelivered 4,467 vehicles. The company has also reiterated the guidance to produce 25,000 vehicles for 2022. However, this is just the beginning of the long-term growth story.
To put things into perspective, the company plans to increase annual production capacity to 600,000 between Normal and Georgia plants. With$17 billion in cashand equivalents as of March 2022, the company is positioned to make aggressive investments.
It’s also worth noting that Rivian already has more than 90,000 pre-orders for R1 from the U.S. and Canada. With potential expansion in Europe and China in the next few years, there is a big addressable market. Deliveries growth is likely to be robust on a sustained basis.
Rivian also has an initial order for 100,000 electric delivery vans fromAmazon(NASDAQ:AMZN). With potential for big orders in the EDV segment, the revenue visibility is robust.
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