General Motors will host an analyst event in October.
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General Motors stock has lagged behind the market for months, and Citigroup says it knows what will break shares out of their doldrums.
General Motors (ticker: GM) is hosting an analyst event on Oct. 6 and 7. Citigroup analyst Itay Michaeli believes it could help start the stock on its path to $100 a share. That would be an increase of almost 100% from recent levels, with the stock trading around $52 on Friday.
That would be a relief to investors. Since GM reported second-quarter earnings on August 4, shares are down about 10%. Over the same span, the S&P 500 is up a little, and the Dow Jones Industrial Average is down about 1%. Ford Motor (F) shares are down 1% as well, while Tesla stock (TSLA) has gained about 8%.
The Chevy Bolt recall and the impact of the global automotive semiconductor shortage has investors worried about the company in the short term. But the event could get investors looking further down the road, Michaeli says.
He is looking for GM to convince investors that the company has growth in its future. GM’s likely growth drivers include transitioning to electric vehicles, selling autonomous driving software, and monetizing its investment in self-driving robotaxi company Cruise, among other things. For Michaeli, GM has more going for it than a profitable truck business.
“GM has proven its ability to both weather downturns and recent production volatility,” Michaeli wrote in a Friday report. GM made money in 2020 during a recession, and profitability is still solid in 2021—even with supply problems plaguing the industry from the global chip shortage. “GM doesn’t have an [earnings] problem,” says the analyst. The coming event should be about growth and unpacking the value of all of the different business opportunities, such as Cruise, to improve the valuation multiple, he adds.
GM trades for about 7.5 times estimated 2022 earnings. The S&P 500 trades for about 20 times. GM gets a low multiple because investors believe there isn’t much earnings growth coming.
Michaeli, a GM bull, disagrees. He rates shares Buy, and his official price target is $90 a share, a little lower than the $100 potential he sees. The average analyst price target is about $72 a share, up almost 40% from recent levels.
He isn’t alone in his bullish view. GM is a beloved stock on Wall Street, with 96% of analysts covering the stock rating shares Buy. Only one of 23, according to Bloomberg, rates shares Hold. In comparison, the average Buy-rating ratio for stocks in the S&P is about 55%.
GM stock rose 1% in Friday trading, while the S&P 500 was flat.
Write to Al Root at [email protected]
