Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments. U.S. stocks jumped Friday, with the S & P 500 on pace for its fifth straight week of gains. The government’s producer price index was cooler than expected, one day after a slightly hotter consumer price index. Bank earnings are the star of the show. During the Club’s Morning Meeting, Jim Cramer said Wall Street is “starting earnings season off with a bang.” Club stock Wells Fargo rose more than 5.5% after quarterly profit exceeded estimates. Check your email inboxes and your texts shortly for our full Wells Fargo earnings commentary. Jim said he would like to buy some more Advanced Micro Devices if he weren’t restricted due to the Club’s trading rules. AMD dropped 1% on Wednesday and then another 4% on Thursday following its Advancing AI meeting. Melius Research said the stock sold off because the market wanted to see another cloud giant in attendance. Jim said the AMD slide was a bit unfair because Jensen Huang, CEO of AI chip leader Nvidia CEO, sucked all the oxygen out of the room during a three-day roadshow. Palo Alto Networks stock is having a great week, up 10% through early Friday, and our best weekly performer. Morgan Stanley raised its price target on the cybersecurity stock to $421 per share from $390. That implies 14% upside from Thursday’s close. We battled the stock, buying some on the dip in early August and then taking some profits later in the month. Jim has been considering adding cyber rival CrowdStrike to the portfolio, pointing out that Bullpen name CrowdStrike didn’t lose customers after its glitch caused a worldwide IT outage in July. Stocks covered in Friday’s rapid fire at the end of the video were: JPMorgan , BlackRock , Tesla , Affirm , and Ferrari . (Jim Cramer’s Charitable Trust is long WFC, AMD, PANW. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Every weekday the CNBC Investing Club with Jim Cramer holds a “Morning Meeting” livestream at 10:20 a.m. ET. Here’s a recap of Friday’s key moments.
DETROIT — A once “dirty” word, and business, in the automotive industry has become a multibillion-dollar battleground for U.S. automakers, led by Ford Motor.
The Dearborn, Michigan-based automaker has turned its fleet business, which includes sales to commercial, government and rental customers, into an earnings powerhouse. And Ford’s crosstown rivals General Motors and Chrysler parent Stellantis have taken notice, restructuring their operations as well.
“There’s much more of an emphasis now on profitability and how fleet can help that,” said Mark Hazel, S&P Global Mobility associate director of commercial vehicle reporting. “[Automakers] are looking at how they strategically go about this. It’s been a very targeted approach with how they deal with fleets.”
Many fleet sales, especially daily rentals, have historically been viewed as a negative for auto companies. They are traditionally less profitable than sales to retail customers and are used by automakers at times as a dumping ground to unload excess vehicle inventories and boost sales.
But Ford has proven that’s not always the case by breaking out financial results for its “Ford Pro” fleet business. The operations have raked in about $18.7 billion in adjusted earnings and $184.5 billion in revenue since 2021.
Such results have led Wall Street to praise the business, as analysts have called it a “hidden gem” and Ford’s “Ferrari,” referring to the highly profitable Italian sports car manufacturer.
“No other company has Ford Pro. We intend to fully press that advantage,” Ford CEO Jim Farley said July 24 during the company’s second-quarter earnings call, in which Ford Pro was the dominant performer.
Fleet sales typically account for 18% to 20% of annual industrywide U.S. light-duty vehicle sales, which exclude some larger trucks and vans, according to J.D. Power.
Part of the opportunity in fleet sales comes from the aging vehicles on U.S. roadways. The average age of the 25 million fleet and commercial vehicles on American roads was 17.5 years last year, according to S&P. That compares with light-duty passenger vehicles at 12.4 years in 2023.
While commercial sales, which are viewed as the best fleet sales, are estimated to be slightly lower this year compared with 2023, both GM and Stellantis have recently redesigned and doubled down on such operations. However, neither reports such results out separately.
“Breaking apart the fleet channel, we see that Commercial sales have been the weakest. And zooming in further, there are just two [original equipment manufacturers] that appear especially challenged: STLA and, to a lesser extent, GM,” Wolfe Research said in an investor note Wednesday.
Meanwhile, Ford’s commercial volumes have increased a “strong” 7% this year compared with 2023, Wolfe said.
While fleet sales data isn’t as available as retail, Wolfe Research estimates Ford is by far the leader in such earnings at a forecast of $9.5 billion this year. That compares with North American operations at GM at $5.5 billion and Stellantis around $3.5 billion, Wolfe estimates.
S&P Global Mobility reports Ford has been the fleet leader for some time. Since 2021, Ford’s market share of new fleet vehicle registrations (categorized by businesses with 10 or more vehicles weighing under 26,000 pounds) has been about 30%. GM, meanwhile, had around 21%-22% during that time, and Stellantis about 9%.
GM, citing third-party data, claims it outsold Ford last year in a segment of fleet sales: commercial vehicles sold exclusively to businesses (with five or more vehicles) and not individual buyers.
Ford, meanwhile, said it counts “all customers who register their full-size, Class 1-7 truck or van under their business,” not just those with five or more vehicles.
Ford claims to lead sales of commercial vehicles, categorized as Class 1-7 trucks and vans, with a roughly 43% share of U.S. registrations through May of this year. That’s up 2.3 percentage points compared with a year earlier, the company said.
The Ford Pro business is led by sales of the automaker’s Super Duty trucks, which are part of its F-Series truck lineup with the Ford F-150, and range from large pickups to commercial trucks and chassis cabs.
It also covers sales of Transit vans in North America and Europe, all sales of the Ranger midsize pickup in Europe, and service parts, accessories and services for commercial, government and rental customers.
Ford Super Duty trucks are seen at the Kentucky Truck assembly plant in Louisville, Kentucky, on April 27, 2023.
Joe White | Reuters
But automakers, including Ford, also see fleet operations as a key driver in other ways, including for electric vehicle sales, as well as reoccurring revenue options such as software and logistical services.
“This revenue has gross margins of 50-plus-percent which drives significant operating leverage and improved capital efficiency,” Farley said during the quarterly call. “The major part of this new software business is actually Ford Pro.”
Ford is aiming to achieve $1 billion in sales of software and services in 2025, led by its fleet and commercial business.
“Ford Pro is core to Ford, and there is potential upside on volumes as well as in software and service,” BofA’s John Murphy said Thursday in an investor note. “On software, Ford Pro accounts for ~80% of Ford’s software subscriptions with an attach rate of only 12%, which is projected to grow to 35%+ over the next few years.”
As Ford touts its fleet business, its closest rivals have amped up their operations.
Chrysler parent Stellantis is relaunching its “Ram Professional” unit this year with goals of achieving record profitability in 2025 and, eventually, becoming the No. 1 seller of light-duty commercial vehicles, which exclude some larger vehicles.
Christine Feuell, CEO of Stellantis’ Ram brand, declined to disclose a time frame for achieving that target but said the automaker believes it can do so after completely revamping its operations to focus on better mainstreaming operations for customers and earnings growth through sales and new services.
“It’s a highly profitable business. Not only on the product side, but on the services side,” she told CNBC during a media event last week. “Software and connected services are really a significant growth opportunity for us as well.
“We’re a little bit behind Ford in launching those services, but we definitely expect to see similar kinds of growth and revenues generated from those connected services.”
Ram makes up about 80% of Stellantis’ U.S. fleet and commercial business. It has a new or revamped lineup of trucks and vans coming to market, plus a host of connected and telematics products to assist fleet customers. It also increased the availability of financing and lending for commercial customers.
“This year truly begins our commercial offensive,” Ken Kayser, vice president of Stellantis North American commercial vehicle operations, said during the media event. “2024 is a foundational year for our brand, as we look to build momentum into 2025.”
GM isn’t sitting idle either. It has revamped its fleet and commercial business. It launched “GM Envolve” last year, its overhauled fleet and commercial business focused on fleet sales, digital telematics and logistics for commercial customers.
Sandor Piszar, vice president of GM Envolve in North America, said the Detroit automaker views the business as a competitive advantage not just to sell vehicles but to create reoccurring revenue and relationships with businesses.
2021 GMC Sierra HD pickup
GM
GM Envolve, formerly known as GM Fleet, reorganized the automaker’s business to be a one-stop shop for fleet customers — from sales and financing to fleet management, logistics and maintenance.
“GM Envolve is a critically important piece of General Motors business. It’s a profitable business,” he told CNBC earlier this year. “We think it is a competitive advantage in the approach we’re taking in this consultative approach of a single point of contact and coordinating the full portfolio that General Motors has to offer.”
GM and Stellantis declined to disclose the earnings and profitability of their fleet businesses.
GM Envolve includes the company’s EV commercial business BrightDrop, which was folded back into the automaker last year instead of it acting as a subsidiary. It didn’t accomplish the growth GM had expected, but EVs have an opening for automakers’ fleet and commercial sales.
“BrightDrop is a great opportunity for General Motors and for GM Envolve,” Piszar said, citing all-electric vans specifically for last-mile deliveries as well as small local businesses. “There’s a lot of use cases and as we ramp up production and get customers to try the vehicle that’s a key piece of our model.”
Unlike retail customers, many fleet and commercial customers have predefined routes or schedules that could accommodate EVs well because they drive locally in a region and could charge overnight when electricity costs are lower.
Brightdrop EV600 van
Source: Brightdrop
S&P Global reports EV startup Rivian Automotive led the U.S. in all-electric cargo van registrations last year, roughly doubling Ford, its closest competitor, at No. 2.
While the upfront investment is high, automakers have argued the eventual payback could be worthwhile for some businesses.
All three of the legacy Detroit automakers are touting such advantages to their fleet customers, while still offering traditional vehicles with internal combustion engines.
Stellantis and Ford also have started highlighting their portfolios of different powertrains such as hybrids and plug-in hybrid electric vehicles as adoption of EVs has not occurred as quickly as many had expected.
Ford last month announced plans valued at about $3 billion to expand Super Duty production, including to “electrify” Super Duty trucks.
“We’ve gone to, on all of our commercial vehicles, a multi-energy platform so we will offer customers the choice that we think no other competitor will have,” Farley said during the earnings call. “We believe we will be a first mover, if not the first mover, in multi-energy Super Duty.”
Ferrari is standing on the top step of the podium, according to Morgan Stanley. Analyst Adam Jonas reiterated his overweight rating and top pick choice on Ferrari. He also raised his price target to $340 from $310 on account of foreign exchange fluctuations, earnings revision and a slight increase in his estimated EBITDA multiple. The new price target implies 8.4% upside from Thursday’s close. “Ferrari trades at a justified premium to luxury brands, but at a discount to luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world renowned brand and a 12+ month customer orderbook,” Jonas wrote in a Thursday note. The analyst cited the company’s strong growth potential and execution, with global shipments expected to have a compound annual growth rate of about 7% through 2030. Morgan Stanley maintained his bull case estimates of $420 per share, which implies 34% upside from current levels. This scenario will come about if Ferrari has an “extremely profitable” shift to electric vehicles and retains a higher multiple than Hermes, according to Jonas. Meanwhile, he raised his bear case projections to $220 from $180. Morgan Stanley predicts the bear scenario could occur if a weaker macro environment results in low shipments and demand levels, as well as a loss of brand relevance. Shares have surged 46.3% year to date and more than 62% over the past 12 months. The stock hit an all-time high on June 30, putting its market cap ahead of General Motors and in close range of Ford’s. —CNBC’s Michael Bloom contributed to this report.
Hedge fund manager David Neuhauser’s fund has beaten both the S & P 500 and the Dow Jones Industrial Average so far this year. The Livermore Partners’ “special situation” hedge fund is up over 10% in the year to date, he told CNBC on Thursday. Meanwhile, the Dow is up 1.6% and the S & P 500 is up around 7% as of Wednesday’s close. He shared with CNBC’s ” Street Signs Asia ” on Thursday some tips on what to buy and avoid in today’s volatile market. Energy and gold Neuhauser said small-cap energy stocks are behind the fund’s outperformance, naming three: Jadestone Energy , Kolibri Global Energy and Vista Energy . Of the three stocks, Kolibri has done the best, rocketing 71% this year, while Vista Energy is up nearly 50%. That comes as oil prices rose this week after a surprise OPEC+ oil production cut announced in early April. He also named gold as one of the best asset classes to own right now, given tailwinds such as a weak dollar and geopolitical issues. “We’ve seen such an under investment in the (oil) space for the past five to seven years. So to me, even withstanding a recession. I think crude prices are in a really strong band,” Neuhauser said. “If we skirt a deeper recession, then … demand is going to surprise us to the upside. And then you can see commodities actually run a fair bit much more than say 20% to the upside on a number of commodities names, especially oil, and even looking at some specific situations within the gold sector,” he added. A ‘luxury playbook’ Neuhauser said he also has a “luxury playbook.” “Because if we are wrong in terms of recessionary fears, and it’s not that deep and protracted, then I think some of those luxury sectors are going to maintain their margins and do quite good,” he said. Livermore owns luxury stocks such as LVMH, Ferrari and clothing retailer Canada Goose Holdings . Also as a hedge, Livermore is short on Tesla and the U.S. dollar , said Neuhauser. Avoid tech Neuhauser said he believes the economy is still in stagflation and a bear market is “still at play.” He pointed out that in the past three months, a number of big tech companies have had layoffs and cost-cutting initiatives. “That of course keeps the hold in margins for the next say six to nine months, and those stock prices start to react. So that’s why those stock prices are up, you know, 20%, 30% from the year start,” he said. The Nasdaq is up nearly 15% so far this year as of Wednesday’s close. The companies are “well insulated” with cash, but when investors look at the outlook for valuation and growth until 2025, they’re going to be “severely disappointed,” he said. More downside is ahead, and that’s not going to “really hit the market” for another three to six months, Neuhauser said. “In the overall index market, I would not be a long … but today that’s where the market is seeing value. And I think that’s going to prove to be an error,” he told CNBC.
