On Sunday, more than 100 million Americans watched one of the most exciting Super Bowls in recent memory. In addition to witnessing the New York Giants beat the New England Patriots, those 100 million-plus viewers also saw a bevy of automaker ads.
One of the most memorable commercials came from General Motors (NYSE:GM), and it featured the company’s Chevrolet Silverado trucks surviving a 2012 Mayan end-of-the-world scenario. The ad also took a shot at rival Ford (NYSE:F), with the surviving Silverado owners wondering where their friend “Dave” was.
But Dave didn’t make it. Dave drives a Ford.
The clever advertising spot got me to thinking about GM shares, and whether now is the time to get behind the wheel of this once-bankrupt recipient of one of the biggest bailouts in U.S. corporate history.
Answering this question now could be a case of great timing, as GM is set to release its earnings for the fourth quarter and full year on Feb. 16. According to analysts’ estimates, GM likely will post net income of approximately $8 billion. That profit would make last year the most successful in GM history, and would nearly double the company’s 2010 net income of $4.7 billion.
If we were to see GM beat the Street significantly, it could be a huge opportunity for short-term traders. The potential pop in GM shares could be significant, so getting in on the stock now could be an exhilarating drive.
Click to Enlarge If we look at a chart of GM shares, we can see the “smart money” already has accelerated its purchases of the stock in 2012. The move higher recently pushed GM shares above their long-term, 200-day moving average, a clearly bullish sign that could be the harbinger of more upside to come.
As for long-term investors, the question of whether GM is a buy is a bit more complex. Although the company has its sights set on a goal of $10 billion per year in profits, it’s also trying to achieve lofty margin goals of 10% in the years to come. That number represents a substantial leap from the current margins of about 6%, and would be among the highest in the auto industry. If GM can achieve this goal, shareholders definitely will be in for a comfortable ride.
If, however, GM fails to meet their targeted headlines, it really could put the brakes on the stock’s current rally. Moreover, if sales in China were to falter, or if the U.S. economy fails to build on its recent upside momentum, it could send GM shares into a significant stall. And at least for now, GM shareholders don’t have a dividend to rest on.
For now, however, I think the positives of owning GM shares outweigh the negatives. So climb into the driver’s seat, and park GM shares in your portfolio garage before next Thursday’s earnings release.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities. He does, however, own a Chevrolet Corvette Z06.