Investing.com -- TD Cowen initiated coverage of the U.S. autos and mobility sector on Friday, issuing Buy ratings for General Motors (NYSE:GM) and Tesla (NASDAQ:TSLA).
The bank told investors in a note that it sees upside potential in automaker stocks despite depressed sentiment across the sector.
"US auto stock sentiment feels as depressed as ever, with most trading at or near historical multiple lows," TD Cowen analysts wrote.
However, they believe the sector is prone to "groupthink and over-extrapolations" that create opportunities for stock pickers.
The bank explains that the key to outperformance lies in identifying optimal exposures, including U.S. auto demand resilience, defensive franchises such as North American pickup trucks, and unlocking value in autonomous vehicles (AV) and artificial intelligence (AI).
"GM is our top pick with a Street-high $105 price target," the firm stated, emphasizing its belief in GM’s turnaround potential.
Tesla also received a Buy rating following its recent stock pullback. Analysts pointed to "potentially consequential catalysts" ahead for the company.
TD Cowen believes AV and AI developments could triple the profit pool available to automakers in the long term.
On the supplier side, TD Cowen’s top pick is Aptiv (NYSE:APTV), followed by Autoliv (NYSE:ALV), Visteon (NASDAQ:VC), Goodyear Tire (NASDAQ:GT), and Aspen Aerogels (NYSE:ASPN), all of which received Buy ratings. Meanwhile, Stellantis (NYSE:STLA), Ford (NYSE:F), Rivian (NASDAQ:RIVN), Lucid (NASDAQ:LCID), and several other auto-related stocks were rated Hold.
TD Cowen expects U.S. auto sales to recover to 16.5 million vehicles this year and 17.1 million in 2026. The firm also noted that potential tariffs on Mexico and Canada could have short-term implications but are unlikely to be permanent.