One of the world’s largest automotive manufacturers, General Motors Company (GM - Get Rating) in Detroit, Mich., is known for its popular brands: Buick, Cadillac, Chevrolet, and GMC. Investors’ optimism surrounding the launch of its 2024 all-electric Chevrolet Silverado EV and others at CES 2022 helped its shares soar to their $67.21 all-time high on Jan. 5, 2022. Over the past three months, the stock has gained 10.3% in price to close Friday’s trading session at $62.27.

GM has made several advancements in the electric vehicle (EV) space. Most recently, it announced on Jan. 6 that its next-generation hands-free driver-assist system, Ultra Cruise, would be powered by a scalable compute architecture featuring system-on-chips developed by QUALCOMM Incorporated (QCOM). This would make it the first to use QCOM’s Snapdragon Ride Platform for advanced driver assistance technology.

However, last month, GM said it is extending a production halt at its Orion Assembly plant in Michigan, which makes the Chevrolet Bolt electric vehicle, through the end of February 2022. Furthermore, several law firms are investigating potential claims against the company regarding warranty recall costs. So, its near-term prospects look uncertain.

Here are the factors that could influence GM’s performance in the upcoming months:

Positive Developments in the EV Space

Chevrolet announced on Jan. 5 that it will expand its EV lineup in the fall of 2023 to include the Equinox EV. On the same day, BrightDrop, a GM company, announced that Walmart Inc. (WMT) had signed an agreement to reserve 5,000 of BrightDrop’s EV600 and smaller EV410 electric delivery vans. Also, FedEx Corporation (FDX) signed a deal with BrightDrop securing priority production for 2,000 electric delivery vans over the next few years.

Last December, GM and VAC of Germany announced plans for VAC to build a plant in the United States to manufacture permanent magnets for electric motors used in the GMC HUMMER EV, Cadillac LYRIQ, Chevrolet Silverado, and other models using GM’s Ultium Platform. These moves are likely to help accelerate the company’s growth in the EV space.

Weak Financials

GM’s top line declined 24.5% year-over-year to $26.78 billion for the third quarter ended Sept. 30, 2021. The company’s adjusted automotive free cash flow came in at a negative $4.39 billion, versus $9.12 billion in the year-ago period. Its net income decreased 40.2% year-over-year to $2.42 billion. Also, its adjusted EPS came in at $1.52, down 46.3% year-over-year.

Low Profitability

In terms of trailing-12-month gross profit margin, GM’s 14.55% is 59.5% lower than the 35.91% industry average. Likewise, the stock’s 0.55% trailing-12-month asset turnover ratio is 47.7% lower than the 1.05% industry average. Also, its 4.63% and 4.66% respective trailing-12-month ROTC and ROTA are lower than the 7.54% and 5.94% industry averages.

POWR Ratings Reflect Uncertainty

GM has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight distinct categories. GM has a C grade for Quality, which is in sync with its lower-than-industry profitability ratios.

The stock has a C grade for Stability, consistent with its beta of 1.18.

GM has a D grade for Growth, which is in sync with analysts’ expectations that its revenue and EPS will decline 8.2% and 43.5%, respectively year-over-year to $34.43 billion and $1.09 for the quarter ended Dec. 31, 2021.

Click here to see the additional POWR Ratings for GM (Momentum, Value, and Sentiment). Also, GM is ranked #34 of 67 stocks in the Auto & Vehicle Manufacturers industry.

Bottom Line

GM has been making several developments in the EV space and expanding its reach. So, its long-term prospects look promising. Analysts expect its EPS to grow at a 15.2% rate per annum over the next five years. However, its revenue and EPS are expected to decline for the quarter ended Dec. 31, 2021. So, we think it could be wise to wait for a better entry point in the stock.

How Does General Motors (GM) Stack Up Against its Peers?

While GM has an overall POWR Rating of C, one could check out these A-rated (Strong Buy) stocks within the same industry: Daimler AG (DDAIF - Get Rating) and Mazda Motor Corporation (MZDAY - Get Rating).

GM shares fell $0.89 (-1.43%) in premarket trading Monday. Year-to-date, GM has gained 5.36%, versus a -2.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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