Is General Motors Stock Still a Buy After Reaching an All-Time High?

NYSE: GM | General Motors Company  News, Ratings, and Charts

GM – General Motors’ (GM) retail sales hit pre-pandemic levels during the fourth quarter, driven by robust customer demand for its new vehicles, especially full-size pickup trucks and SUVs. The stock appears to have plenty of upside despite hitting all-time highs following the company’s announcement of ambitious EV expansion plans. Let’s look closer.

Founded in 1897, General Motors Company (GM) is one of the most established companies in the automotive industry. The company designs, builds, and sells trucks, crossovers, cars, and automobile parts worldwide. GM operates primarily through GM North America, GM International, Cruise, and GM Financial. Consistent  with its commitment to a sustainable future, the company is working with EVgo to build more than 2,700 fast-charging electric stations over the next five years, which is expected to triple the size of the United States’ largest public fast charging network.

The stock hit its all-time high of $51.87 on January 14 after Mary Barra, CEO, revealed the company’s ambitious EV goals at the Consumer Electronics Show (CES). GM even unveiled its Cadillac flying car and electric shuttle concepts at the show.

GM has gained 20% year-to-date to close Friday’s trading session at $49.97. For the third quarter ended September 30, 2020, GM grew its market share for all three of its fleet segments. Also, its sales in the United States and China recovered much faster than expected. Its sales in China increased 12% year-over-year and United States’ sales improved sequentially each month.

This year, the company expects to have a full year of production of its all-new Cadillac Escalade, GMC Yukon, Chevrolet Tahoe and Suburban. GM also announced its plans to build full-size pickups in Oshawa, Ontario beginning  in early 2022. The company’s logo redesign for the first time in decades also marks a significant change, reflecting its  new and innovative plans for the EV-driven future.

Its  impressive performance and the potential upside based on several factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates GM:

Trade Grade: A

GM is currently trading above its 50-day and 200-day moving averages of $43.50 and $34.29, respectively, indicating an uptrend. Moreover, GM has gained 53.3% over the past three months, reflecting  solid short-term bullishness.

The company sold 771,323 vehicles for the fourth quarter ended December 31, 2020, representing a  4.8% year-over-year increase. Total Cadillac deliveries increased 5.8% year-over-year to 42,909, led by its XT5 brand, which accounted for 25.5% of total Cadillac sales. GM’s net income for the third quarter ended September 30, 2020 increased 72.1% year-over-year to $4.05 billion. And its EPS increased 64.5% year-over-year to $2.83.

On January 12, GM launched a new business, BrightDrop, which is expected to offer an ecosystem of electric first-to-last-mile products, software, and services to empower delivery and logistics companies to move goods more efficiently. GM Defense LLC, a subsidiary,  announced on December 17 that it has started renovations of an existing GM building located in Concord, North Carolina to support the production of the Infantry Squad Vehicle (ISV). It celebrated the delivery of its first ISVs to the United States Army in October.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, GM is well positioned. The stock is currently trading 3.7% below its 52-week high of $51.87, which it hit on January 14.

The company has a demonstrated track record of strengthening its business and has grown significantly over the past years based on a growing number of franchises.

Peer Grade: A

GM is currently ranked #6  of 51 stocks in the Auto & Vehicle Manufacturers industry. Other popular stocks in the auto & vehicle manufacturers group are Toyota Motor Corporation (TM), Volkswagen AG (VWAGY), and Daimler AG (DDAIF).

With a 42.2% gain, GM has comfortably beaten the returns of these popular industry participants over the past year. TM, VWAGY, and DDAIF have returned 6.5%, 1.8% and 29.2%, respectively, over the same period.

Industry Rank: A

The Auto & Vehicle Manufacturers industry is ranked #3  of 23 industries. The companies in this industry manufacture and sell vehicles such as passenger cars, light trucks, motorcycles, and others.

This industry has been gaining significant investor attention lately thanks to  continued innovations by  the constituent companies to meet  market demand. Many companies in this industry have been entering the EV space. So, the industry is expected to witness huge demand as the shift to EVs gains pace.

Overall POWR Rating: A (Strong Buy)

GM is rated “Strong Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

Even though GM hit its all-time high on January 14, we think it is wise to buy its shares now because its EV journey has reached an “inflection point” and could grow significantly this year. At  the virtual Barclays Global Automotive Conference held in November, the company announced s plans to launch 30 new global EVs worldwide  through 2025.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is good for GM. It has an average broker rating of 1.5, indicating a favorable analyst sentiment. Of 18 Wall Street analysts that rated the stock, 4 rated it “Strong Buy,” and 11 rated it “Buy.”

The consensus revenue estimate of $136.11 billion for 2021 represents a 12.6% increase year-over-year. Moreover, GM has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to grow 24.8% in 2021, and at a rate of 8.5% per annum over the next five years.

Note that GM is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

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GM shares were trading at $54.72 per share on Tuesday morning, up $4.75 (+9.51%). Year-to-date, GM has gained 31.41%, versus a 1.08% 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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