Why You Should Avoid These 2 Auto Stocks In The Second Half of 2026

The automotive sector is capital-intensive and intensely competitive. O'Rielly Automotive (NASDAQ: ORLY) has built an impressive distribution network, and Wall Street recognizes it. Lucid Group (NASDAQ: LCID) is still trying to get its business up and running, but the process hasn't been going very well. You should probably avoid these stocks for very different reasons in the second half of 2026. Here's a look at each one.

O'Reilly Automotive is a very well-run company

Among auto parts retailers, O'Reilly is a top player. Over the past decade, the company's revenues have increased at an annualized rate of roughly 8%, while earnings have advanced at an annualized rate of roughly 17%. The company operates across the retail and commercial segments of the auto industry, serving both do-it-yourself customers and your local auto shop. It has over 6,600 stores spread across 48 states, Mexico, and Canada.

Image source: Getty Images.

The company had a solid first quarter in 2026, with sales up 8% and earnings up 16%. But the stock is in the middle of a drawdown anyway, off around 15% from its all-time highs. That's not an unusual pullback, noting that the stock has declined by 25% or more seven times since the 1990s. O'Reilly is a growth stock, so this shouldn't come as much of a surprise.

The problem is that the stock still looks a bit expensive. For example, its price-to-sales ratio is 4.2x versus a five-year average of 4x. The price-to-earnings ratio is 29x versus a five-year average of 26x. The forward P/E ratio is 28x compared to a long-term average of 24x. It wouldn't be a dramatic mistake to buy O'Reilly at these levels, especially if you are a long-term investor. But it still isn't cheap. For those with a value focus, it probably makes sense to remain patient here.

Lucid Group is in a risky position

Lucid's stock price is down roughly 99% from its all-time high. The company is still just a start-up in the electric vehicle (EV) sector. The problem is that, production-wise, it is barely a rounding error for industry leaders like Tesla (NASDAQ: TSLA). To put some numbers on that, Lucid's first-quarter 2026 production totaled 4,774 vehicles, while Tesla produced 451,758 vehicles. Lucid isn't even in the same league, and it isn't only competing with Tesla; every major auto company now produces EVs.

Being small is just the start. The company is also struggling to meet its own targets. Notably, it just brought in a new CEO and suspended its full-year production guidance. The new CEO came in and cleaned house, as well, bringing in a new leadership team. Meanwhile, the company continues to lose money on every car it sells, with its revenues falling well short of its production costs. And notably, it sold only around 80% of the cars it built in the first quarter.

There's a chance the new leadership team can turn this story around, but as it stands, Lucid could be in deep trouble. Most investors should avoid the stock until it at least turns a gross profit, but waiting until it generates positive earnings would probably be a better choice. Neither of those outcomes is likely in the second half of 2026.

One auto stock worth watching and one to avoid

At the end of the day, O'Reilly is probably worth keeping on your wishlist. If the drawdown continues in the second half of 2026, it may become an attractive buy. But, right now, it's still a little expensive. Lucid, meanwhile, is struggling to survive. Most investors probably shouldn't make the bet that it does until the new CEO and leadership team have started to improve the company's currently troubling story.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.