General Motors (GM) is an iconic car company with solid management, an excellent outlook, and robust earnings. It is an enticing opportunity in the stock market.
General Motors, Fiat Chrysler Automobiles (FCAU), and Ford (F) are the three largest U.S. car manufacturers. They are collectively referred to as The Big Three.
At the start of the year, many investors were optimistic about growth stocks. However, they are now suffering because of several factors. This is not the time to be too cautious.
One of the most significant factors that have affected growth stocks is rising interest rates. These make it more expensive for companies to borrow money.
The trade war between China and America has had an impact on the market. Companies that relied heavily on international trade have been hit the hardest, leading to a decline in acceptance and overall performance of these stocks.
General Motors is one of the most underrated stocks in the market. It has a diversified revenue base with strong brands and a new strategy to diversify its revenue base. Additionally, the company has invested in EVs and other innovations such as autonomous vehicles.
I am bullish on the stock.
GM vs. Tesla
Tesla (TSLA) is a game-changer in the automotive industry and has been for years. The company has been leading the way in EVs since its inception.
The company’s shares are currently overvalued, which means they are too expensive to purchase. This also means a risk involved when investing in Tesla because the stock price could go down at any time. Other stocks have a better potential for growth and better safety nets than Tesla.
Why Is General Motors Not Doing as Well?
Toyota (TM) took over from GM last year to become the top-selling automaker in the U.S.
The Japanese-owned company has been a strong player in the American market for decades and has been steadily growing its share over time, which GM could not sustain.
GM’s fourth-quarter was rough. Sales plunged 43% year-over-year, to 440,745 vehicles. Last year, GM saw its car sales decline by 13% to 2.2 million new cars sold in the America.
The U.S. auto industry is in a difficult position. Sales of new vehicles took a severe hit in the second half of 2021 because of low inventory and production delays.
GM is struggling to produce enough new cars and trucks to meet demand, leading to long waiting periods for customers who want to buy or lease a new vehicle.
Chip Shortage
The semiconductor shortage is predicted to last for the next few years, which will hugely impact many industries, especially automotive and electronics. It will take some time to develop new supply chains, and General Motors is already suffering.
General Motors is tackling the global semiconductor shortage by building new designs in North America. General Motors has partnered with seven different chip providers to explore the development of three new families of microcontrollers.
This will dramatically reduce the number of chips currently in use on future GM vehicles and will help decrease development costs.
New EVs and other driver assistance systems will be a big boon for GM. The new microcontrollers will simplify a lot of the individual components that make up a chip, simplifying the circuit design and making it more reliable.
The idea is that the ecosystem should be more resilient, scalable, and always there to make sure GM never has to worry about it not meeting its needs.
Investing In the Future
GM is making large-scale commitments to become all-electric. By 2025, it expects that over 30 new EVs will be on the market.
General Motors plans to spend $7 billion on a battery plant in Michigan, which will produce electric trucks by 2024. It will also overhaul an existing factory outside of Detroit. GM will be creating 4,000 jobs, and expanding its capacity to build EVs in the U.S. with this investment. GM plans to phase out gas-powered automobiles by 2035.
The company’s plan to transition to a more environmentally friendly industry is one of the main focuses of the business. GM has been focusing on EVs for a while now and has begun making them more available.
Some of the other goals include those connected with autonomous vehicles that hope to achieve congestion reduction and fewer injuries.
The company’s focus on EVs is an “aspiration,” but it will be surrounded by many other factors that need work. Other important factors like regulations, infrastructure, etc., will also come into play.
Wall Street’s Take
Based on 15 Wall Street analysts’ 12-month price targets, GM stock earns a Moderate Buy consensus rating. GM has received 10 Buy ratings and five Hold ratings in the past three months, making sentiment, overall, bullish on the stock.
The average General Motors price target is $74.27, which represents a 50.3% upside from the last recorded price.
Conclusion
GM has been getting outshined by other automakers in terms of market share.
However, investors need not fret. There are several reasons to remain positive about GM’s future. GM’s most popular decisions include forward-looking acquisitions and green investments.
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