The automobile industry was one of the industries that had it the worst during the pandemic. Roads were completely deserted and looked like scenes from post-apocalyptic movies, albeit without extensive destruction of property.
As the world begins to emerge from the pandemic, many automobile brands are making a gradual return to pre-pandemic sales. Some haven’t quite gotten back on their feet yet, but General Motors Company (NYSE: GM) is not one of them.
Here’s the value stock case for GM stock.
Source: Yuvraj Singh
General Motors is one of the biggest automakers in the US. The Cadillac maker was the biggest automaker in the US by market share, according to Statista. It gets the majority of its revenue from sales of popular brands, such as Chevrolet, Cadillac, Buick, and GMC. That we can find such statistics about a company that barely survived bankruptcy in 2009 is more than impressive.
GM stock jumped by over 50% to an all-time high of $65 in 2021 before ending the year on a 41% upside. Concerns about the shortage of semiconductors and the company’s late appearance in the EV party have weighed on the stock.
This shortage of semiconductors forced the company to reduce production later in 2021 but the company still managed to post strong earnings. And as the semiconductor shortage begins to ease long term, we expect GM to ramp up production while accruing more in earnings.
In that year, the company recorded $127 billion in revenue for the year ended in 2021, a 3.7% increase from what it was in 2020. Earnings before Interest and Taxes (EBIT) also soared by 47% to $14.3 billion in the same period and diluted earnings per share grew by a substantial 55% to $6.7. These figures tell us that GM is not in a bad place financially.
Going forward, the company is plotting its transformation to electric vehicles. GM has a target of delivering 400,000 EVs by 2023 in North America. The company has been working really hard on its EVs to meet that end. And demand is already beginning to meet the company’s EV targets.
One of it’s popular brands Hummer, which had been discontinued, made a return as an EV brand late last year. The electric pickup & SUV models have already garnered 60,000 reservations.
But who are we kidding? GM is late to the EV party. It’s going to do a lot of convincing before it can begin to compete with brands like Tesla, who have had a major head start. But if any company can pull it off, it has to be GM. It already has the infrastructure for mass production. The company just has to work on making its EV products excellent.
Technical Analysis
The year 2021 saw the GM stock break out of the $45.5 – $48 resistance level to soar prices that the stock had never been worth previously. It created a new resistance level at $64 – $66 in the process, but the price is back to the $45.5 – $48 support level.
The price looks to be in a range and if the current support level holds true, the stock could rebound and make about 30% upside. This is the value in the GM stock that value investors may look to take advantage of in the near future.
We believe GM is a buy as we speak for a potential 30% upside to $63. However, if the price falls below $40, this could serve as a better buy level for value investors.
