5 key car stocks to buy or avoid for 2025: BofA

Investing.com -- BofA Securities says European automakers in 2025 would be navigating price pressures, regulatory hurdles and face competition from Tesla (NASDAQ:TSLA ) and Chinese rivals.

While legacy automakers face margin risks, select auto suppliers and a few OEMs offer attractive opportunities, the firm said in a note.

Brokerage listed conviction calls on the following stocks, with “buy” rating on them -

Continental: The firm recommends Continental, citing potential value unlock from its planned automotive spinoff, restructuring-driven cost savings, and semiconductor tailwinds expected to boost growth in 2025-26.

Valeo (EPA:VLOF ): Lower capital expenditures, cost savings, and more profitable contracts position Valeo for significant EBIT and EPS growth. BofA also sees room for an earnings or guidance surprise given low market expectations.

Pirelli: With strong visibility on high single-digit earnings growth, Pirelli is well-positioned in the challenging auto sector. The resolution of its Chinese shareholder overhang could further re-rate the stock.

Stellantis (NYSE:STLA ): After a transitional 2024, Stellantis is expected to rebound strongly in 2025, aided by better fixed-cost absorption and minimal impact from stricter CO2 regulations. Investor confidence could grow if Chairman John Elkann appoints a new CEO.

While BofA downgraded Mercedes-Benz (OTC:MBGAF ) to "Underperform," citing a weak model cycle and a difficult 2025 marked by a transition to its MB.EA platform. The firm expects challenges to persist until 2026.

Automakers face headwinds from stricter EU emissions targets, which could weigh on margins unless delayed regulations provide relief.

However, suppliers appear better positioned, benefiting from restructuring and lower input costs despite near-term risks such as a potential Volkswagen (ETR:VOWG_p ) strike in early 2025.

Source: Investing.com