We recently published a list of 7 Best Car Stocks To Invest In Now. In this article, we are going to take a look at where BorgWarner Inc. (NYSE:BWA) stands against other best mid cap growth stocks.
Robotaxis: A Market Not To Be Ignored
A lot of the conversations in the automotive space right now, specifically with respect to electric vehicles, is the impending arrival of robotaxis – autonomously driven taxis for ride-hailing – in the US market and beyond. There are several major players in this market at present, including notable Chinese EV makers and, perhaps most importantly, Elon Musk’s well-known autonomous vehicle manufacturing company. With this new product set to be unveiled in less than a month now, many investors are wondering about how the automotive sector will develop as the world gradually shifts to electric vehicles.
A lot of the talk surrounding EVs has been discouraging these past few quarters, primarily because sales for EVs are down in light of higher price tags. The robotaxi business model is something that is thus generating a lot of excitement because this is a fresh new take on the EV space – and one that allows for the rise of EVs in a more cost-effective manner. According to ARK Invest’s Director of Investment Analysis, Tasha Keeney, robotaxis demonstrating a strong hold over the automotive sector and generating growth is something that investors can expect to see over the next five years. She thus believes that ignoring robotaxis is a huge mistake for those following Musk’s EV maker’s progress and the general EV space.
How Will Robotaxis Expand the Ride-Hailing Opportunity?
Keeney believes that Musk’s robotaxis will be able to take over a significant share of the ride-hailing market because it offers a cheaper option to ride-hailers – especially younger ones. Taking the example of China, where robotaxis are currently being utilized for rides that cost as little as under a dollar, Keeney noted that Musk’s company can undercut the ride-hailing market in the US in much the same way. These days, a typical ride from the most used ride-hailing platform in the US costs about $2 on average. With Musk’s robotaxis, ride-hailers can expect to fully reap the benefits of lower operating costs because of the EV platform.
By adding the autonomous driving factor on top of this, Keeney expects robotaxis to really leverage the cost structure and lower ride-hailing costs overall. Through this, the possibility of more people being brought into the ride-hailing market seems to look less like a distant possibility and more like an inevitable development. This is especially the case for younger individuals, who would see the benefit of foregoing buying new vehicles and instead opting to catch an autonomous ride that will likely cost them much less than a traditional ride-hailing service and definitely less than driving their own personal cars.
Despite all this, Musk is expected to face immense competition from other markets, particularly China, where EVs and robotaxis are being developed at speeds at least as impressive, if not more, than those seen in the US. Despite this situation of having to share market share with other players, investors can expect companies working in the EV space to see greater growth in the next few years. Considering the immense opportunity present in the automotive space based on this analysis, we have compiled a list of the best car stocks to invest in now.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Workers assembling a state-of-the-art engine in a modern auto factory.
BorgWarner Inc. (NYSE:BWA)
Number of Hedge Fund Holders: 41
BorgWarner Inc. (NYSE:BWA) is a provider of solutions for combustion, hybrid, and electric vehicles. It offers turbochargers, eBoosters, eTurbos, timing systems, emissions systems, and more.
Considering the fact that BorgWarner Inc. (NYSE:BWA) has a tech-focused portfolio of products, it has managed to perform well in the second quarter. Its gross margin came in at 10.4%, up 30 basis points year-over-year, and it has also raised its full-year margin outlook to 9.6%-9.8% from 9.2%-9.6% previously, based on its year-to-date performance.
Many investors are following BorgWarner Inc. (NYSE:BWA) because of its recent expansion of its EV and hybrid product offerings under the company’s “Charging Forward” initiative. Through this, BorgWarner Inc. (NYSE:BWA) is attempting to capture a sizable portion of the rapidly growing EV market, with company management targeting $10 billion in annual Product sales by 2027.
BorgWarner Inc. (NYSE:BWA) has also recently made some acquisitions, namely of Eldor and Hubei Surpass Sun Electric Charging, as part of its ambitious efforts to gain a larger market share of the EV space. Through these acquisitions, the company is expected to enhance its capabilities in power electronics and charging infrastructure.
We saw 41 hedge funds long BorgWarner Inc. (NYSE:BWA) in the second quarter, with a total stake value of $725.5 million. Harris Associates was the largest shareholder, holding 10,623,235 shares.
Overall, BWA ranks 5th on our list of 7 best mid cap growth stocks. While we acknowledge the potential of BWA as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BWA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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