With “peak auto” trends having arrived long before the pandemic-induced recession, the automotive industry has had many better years than in 2020. New trends may be helping to change that landscape ahead, from electrification to replacement. There may even be some upside for the auto sector coming out of the pandemic.

BofA Securities has issued a very positive automotive sector report that is calling for third-quarter results in 2020 to be almost unbelievably good after a somewhat impressive second quarter. John Murphy, the BofA analyst behind the call, believes that the set up into earnings supports a constructive stance at the same time that rampant investor skepticism remains in place. Murphy’s take is that the auto stocks have yet to price in a more sustainable earnings recovery into 2021 and 2022.

While BofA is calling for better than expected sales in the industry, 2020 is still expected to be a year of decline. The firm’s new year-over-year decline in global production is expected to be 19%, compared with a prior expected decline of 23%. North American production is now forecast to show a 21% decline, instead of its prior 29% decline. The prior forecasts of 25% in Europe and 19% in China production declines were revised to declines of 24% and just 9%, respectively.

Remember that investors should never use a single analyst call as a sole basis to buy or sell a stock. That said, these views are offered as a preview for what to expect based on third-quarter earnings, coming out any day, and based on expectations around guidance.

General Motors Co. (NYSE: GM) was reiterated as Buy and the BofA price objective was raised to $65 from $60. That is a premium valuation over Ford, but Murphy sees GM’s core business as being well managed despite a fading cycle. Murphy also sees that GM’s investments in the future of mobility may offer upside, including an autonomous electric vehicle fleet, car sharing from Maven and OnStar in connectivity.

That puts the BofA team with the highest analyst price target of all sell-side firms, and the consensus analyst price target from Refinitiv was $41.19. GM shares traded above $31 on Thursday.

Ford Motor Co. (NYSE: F) was maintained as Buy with the same $9 price objective. The valuation methodology reflects a through-cycle multiple on trend level sales and earnings with most companies seen as generally better positioned to withstand the industry pressures. Ford is valued at a slight discount to peers as the increased macro risk and industry risk meets uncertainty around Ford’s transformation.

Ford traded near $7.50 on Thursday, and its consensus target price is $7.96.

Ferrari N.V. (NYSE: RACE) still has a Buy rating at BofA, though its price objective was raised to $265 from $235. This also comes with a premium valuation to peers, which was noted because of its ongoing volume, sales and earnings growth and with a strong cash flow position.

Ferrari traded near $185 on Thursday, and its consensus target price was $196.29 ahead of the call.

Tesla Inc. (NYSE: TSLA) may look to be a bit odd in the BofA call, since its rating remains as Neutral and with an unchanged $550 price objective. Despite that Neutral rating, the target is still handily higher than the current share price. Tesla comes with substantial premiums in the enterprise value versus sales and earnings before interest, taxes, depreciation and amortization. Shares of Tesla traded around $450 on Thursday, in a split-adjusted 52-week range of $50.04 to $502.49.

BofA maintained many price objectives for automotive parts makers, suppliers and dealerships. These were some of the additional price objective changes seen in Thursday’s call:

American Axle & Manufacturing Holdings Inc. (NYSE: AXL) was maintained as Buy, but the price objective was lowered to $11.50 from $14 (versus a current price below $7).

CarMax Inc. (NYSE: KMX) was maintained as Buy but its price objective was lowered to $130 from $135 (versus near $91).

Aptiv PLC (NYSE: APTV) was reiterated as Buy and its price objective was raised to $110 from $95 (versus near $97).

Asbury Automotive Group Inc. (NYSE: ABG) was reiterated as Buy and the price target was raised to $170 from $151 (versus around $115).

AutoNation Inc. (NYSE: AN) was reiterated as Buy and its price objective was raised to $77 from $76 (versus near $62).

Group 1 Automotive Inc. (NYSE: GPI) was reiterated as Buy and its price objective was raised to $185 from $157 (versus about $124).

Penske Automotive Group Inc. (NYSE: PAG) was reiterated as Buy and its price objective was raised to $70 from $67 (versus below $54).

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