General Motors Co. (GM) designs, builds, and sells cars, crossovers, trucks, and automobile parts worldwide. The company has five primary business segments: GM North America, GM Europe, GM International Operations, GM South America, and GM Financial segments. It is currently the only company with a fully integrated solution to produce self-driving vehicles at scale.
As the economy revives, the demand for cars is expected to increase significantly with people avoiding public transportation and subways. China, which is a major market for GM, has been recovering faster from the deadly pandemic and the demand for private cars has already increased in the country.
GM has gained 88.5% since hitting its 52-week low in mid-March. This promising backdrop and the potential upside based on a number of factors have helped the stock earn a “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 $30.59 and $26.52, respectively, indicating an uptrend. Moreover, GM has gained 38.5% over the past six months, reflecting solid short-term bullishness.
The company showed its strength in the China market for the third quarter ended September 2020 with deliveries of more than 771,400 vehicles, up 12% year-over-year. With the pandemic-induced higher home construction activity and strong demand for boats and RVs which are particularly favorable for heavy-duty pickups, GM’s retail shares have been climbing in the third quarter despite tight inventory. GM’s large pickup trucks Chevrolet Silverado HD gained 9% and GMC Sierra HD gained 11% compared to the year-ago quarter.
Moreover, GM teamed up with Uber Technologies, Inc. (UBER) to help accelerate the rideshare industry’s transition to an all-electric, zero-emissions future by offering drivers on Uber’s platform special pricing on the purchase of a new electric vehicle and charging accessories.
Nikola Corp. (NKLA) and GM also agreed to form a strategic partnership in September, wherein GM could acquire an 11% stake in NKLA. In the words of Chairman and CEO Mary Barra, “This strategic partnership with Nikola, an industry leading disrupter, continues the broader deployment of General Motors’ all-new Ultium battery and Hydrotec fuel cell systems.”
GM has also been investing heavily in key product programs and launches, including its EV programs and AV vehicle technology, full-size trucks and key crossover programs.
Buy & Hold Grade: C
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, the stock is currently trading 23% below its 52-week high of $38.96.
Peer Grade: B
GM is currently ranked #11 out of 29 stocks in the Auto & Vehicle Manufacturers industry. Other popular stocks in the auto & vehicles manufacturers group are Toyota Motor Corporation (TM), Honda Motor Company, Ltd. (HMC), and Ford Motor Company (F).
TM, HMC and F declined 5.6%, 15% and 16.6% year-to-date, respectively, versus GM’s 13% decline over this period.
Industry Rank: B
The Auto & Vehicle Manufacturers industry is ranked #19 out of the 123 industries in the StockNews.com universe. With people avoiding going out amid the pandemic, the industry was hit hard. However, there has been an increasing demand for private cars and with more home constructions, the demand for large pickup trucks have also been growing. As the economy recovers with the gradual reopening of businesses, schools and universities, the automotive sector should witness a high demand in the upcoming months.
Overall POWR Rating: B (Buy)
GM is rated “Buy” due to its short-term bullishness, solid growth prospects, and recovery of the industry, as determined by the four components of our overall POWR Rating.
Based on its continued business growth, strategic partnerships, and strong financials, GM has the potential to surge in the upcoming months despite gaining 88.5% since its March low.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for GM. It has an average broker rating of 1.22, indicating a favorable analyst sentiment. Out of 16 Wall Street analysts that rated the stock, 13 rated it “Strong Buy.” Moreover, GM has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus EPS estimate of $1.11 for the quarter ending December 2020 indicates a significant improvement year-over-year. Its EPS is expected to grow 87.3% next year. This outlook should keep GM’s price momentum alive in the near term.
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GM shares . Year-to-date, GM has declined -9.87%, versus a 9.52% 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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