Auto stocks are surging.
The group saw double-digit moves Tuesday on the back of the broader stock market’s one-day recovery rally, fueled by hopes that Congress would pass its pending coronavirus stimulus plan. The Dow Jones Industrial Average closed more than 11% higher, its biggest daily percent gain since 1933.
General Motors, Ford and Tesla also made waves on Wall Street early Tuesday. GM announced it would suspend its 2020 outlook and draw down up to $16 billion in credit, calling the move a “proactive measure” meant to sustain the company’s operations and liquidity.
GM shares closed nearly 20% higher on Tuesday, at $21.11.
Ford and Tesla were highlights in a note from UBS analysts, who downgraded Ford’s stock to “neutral” from “buy” on concerns around the company’s debt in a worst-case market scenario. The firm also upgraded Tesla to “neutral” from “sell” on “relatively high demand visibility and its sustained tech leadership.”
Ford’s stock ended Tuesday’s trading session nearly 23.5% higher, at $4.95. Tesla shares climbed over 16% to $505.00.
One of these names is in a much stronger technical position than the others, Bill Baruch, the founder and president of Blue Line Capital, told CNBC’s “Trading Nation” on Tuesday.
With GM and Ford shares both near lows not seen in years — or, in GM’s case, ever — Tesla’s technical strength renders the stock “an animal of its own,” Baruch said, pointing to the chart.
“It’s still a very constructive chart,” he said. “You had this just melt-up higher going on. Everybody was talking about it almost hitting $1,000. But when we pulled back just now, … it hit strong support of the 200-day moving average. It’s bounced off that. The previous area of, say, $380, $400, that we could not break out above through 2018, through 2019, until it finally did, is now support aligning with that 200-day moving average. I think there is value here on a trading perspective from $400.”
With huge swaths of consumers hunkered down at home, the problem all auto companies now face is the natural drop in discretionary spending and big-ticket purchases, Baruch said.
“Are people going to be buying $100,000 Teslas now?” he said. “If you look back the last 18 months, the consumer was driving the economy, and that’s what really has me worried here. … But even with this consumer spending driving the economy, people did not want to buy GM or Ford stock. These were troubled stocks already. This just makes it worse.”
Gina Sanchez, the founder and CEO of Chantico Global, said there was more trouble ahead for automakers beyond a decline in consumer spending.
“They are suffering from supply chain problems as well,” she said in the same “Trading Nation” interview. “So, … not only do you not have people who want to buy your stuff, but you don’t have a lot of stuff to sell. And so, if and when that rebound comes, the question is, will they be ready with new models to sell?”
The best bets for ramping up production quickly were the two legacy players, Sanchez said, and of the two, one stood out to her as the top pick.
“I agree with Bill that both Ford and GM were troubled stocks, troubled for different reasons,” she said. “Ford was caught back-footed on the back of a bad launch. GM was just the result of many, many troubles over many years. And GM’s selling point was always that it was very cheap, but, actually, Ford is cheaper now. And Ford has a better balance sheet, it has better capacity, and I think if you’re going to position to sort of ramp up out of this, I’d say Ford has the best shot of all three of these.”