In the past few days, many analysts have begun to substantially reduce auto sales estimates for the rest of 2011, and for 2012 as well. Consumer confidence has fallen in recent weeks, and the stock market correction may have further damaged the economy. A new Bloomberg article summarizes a number of analysts' auto sales estimate revisions and states "Goldman Sachs today lowered its 2012 U.S. auto sales estimate by 1 million light vehicles to 13.5 million. The New York-based investment bank sees 12.8 million deliveries this year. RBC Capital earlier this week lowered its estimates for 2011 by 200,000 units to 12.5 million and by 700,000 to 13.3 million for next year."
It's challenging for companies with very strong balance sheets and highly profitable current operations to weather a potential recession or maybe something even worse. That is why companies that have lots of debt on the balance sheet or are reporting minimal profits or even losses will probably be smart stocks to avoid. Shares of both Tesla (TSLA
) and Sirius XM (SIRI
) have been dropping lately and could continue to under perform in the coming months. Here is a closer look at both stocks:
Sirius XM Radio, Inc. (SIRI)
is a leading satelite radio company. According to Yahoo Finance
, Sirius has about $3 billion in debt and about $520 million in cash. This is not the kind of balance sheet I want to be invested in during a possible recession. As the Bloomberg article indicates, analysts are expecting much lower car sales and that should eventually impact the level of new subscribers for this company. I believe analysts could lower earnings estimates for Sirius in the coming weeks and that could put more pressure on the stock.
Here are some key points for SIRI:
Current share price: $1.69
The 52-week range is 95 cents to $2.44
Earnings estimates for 2011: 7 cents per share
Earnings estimates for 2012: 8 cents per share
PE Ratio: about 25
Book value: about 13 cents
Tesla Motors (TSLA)
is a designer and manufacturer of electric vehicles. This company has reported losses and analysts expect the losses to continue into 2012. With auto sales estimates for almost all makers coming down substantially, it's only common sense that Tesla might not sell as many cars in 2012 as some previously expected. Furthermore, oil prices have been dropping and that makes gas much more affordable. A recession and lower gas prices could be very challenging for a maker of pricey electric vehicles.
Here are some key points for TSLA:
Current share price: $23.11
The 52-week range is $18.56 to $36.42
Earnings estimates for 2011: a loss of $2.16 per share
Earnings estimates for 2012: a loss of $1.65 per share
PE Ratio: n/a
Book value: about $3.35
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.