Why GM Stock Looks Like a Great Buy for Longer-Term Investors

With General Motors (NYSE:GM) preparing to launch several very promising  electric vehicles as the EV market rapidly ramps up, the Street finally starting to realize GM’s potential, and the company pursuing a new alliance strategy,the longer-term outlook of GM stock is quite positive.

Image of General Motors (GM) logo on corporate building with clear sky in the background
Source: Katherine Welles / Shutterstock.com

GM’s Upcoming EVs Are Very Promising

I’ve been upbeat about GM’s EV lineup for many months. In March, I noted that GM was reportedly prepared to unveil  “ 12 new EVs,” including “an electric version of its Hummer truck and an electric Cadillac SUV.” I added that “by mid-2022, GM is looking to produce a second, ‘slightly smaller’ Cadillac SUV.”

I pointed out that “the relative success that GM has had with its Chevy Bolt EV bodes well for its ability to develop appealing electric vehicles in the future.”

Now I’m much more bullish about the outlook of GM’s EVs. First of all, the fact that multiple companies are partnering with GM on EVs and/or using its EV technology indicates that the automaker has a great deal of expertise in the area. (I’ll discuss the company’s alliances more thoroughly below).

New Launches, Better Prospects

I’m very pleased with the company’s recent decision to launch multiple advanced EVs in the world’s leading EV market, China. Specifically, the new head of GM’s China unit, Julian Blissett,  recently told Reuters that the company would ” roll out bigger but greener sports-utility vehicles…and target entry-level buyers with low-cost micro {EVs}.”  He also indicated that the company’s Cadillac, Buick,Baojun, and Wuling brands would all offer many EVs going forward.

Given GM’s strong brand in China and the recent success that Nio (NYSE:NIO) has had with its SUVs in the Asian market, I’m confident that GM’s electric SUVs and upper=end electric sedans will do well in the country. Also increasing my bullishness is my belief that GM’s decision to launch inexpensive micro EVs in China is a great idea.

In multiple, recent articles about Electrameccanica Vehicles (NASDAQ:SOLO), I’ve explained why I think that low-cost, small EVs are likely to be appealing to young, environmentally conscious consumers, especially those who are working from home. GM’s new micro EVs can appeal to a similar demographic in China.

GM’s New Alliance Strategy Is Brilliant

One of GM’s major problems is that, when it comes to sedans, the company’s brand in the U.S. is quite weak among those who are below the age of 60.

The shortcomings of American-made cars back in the 1970s and 1980s, caused young and middle-age Americans to be much more enthusiastic about the cars of Japanese and European companies.

I know older Americans who have owned GM’s vehicles have been generally quite satisfied with them.

I’ve been very happy with my pre-owned GM Volt which I purchased almost a year ago. Moreover, China’s enthusiasm for the company’s vehicles also indicates that the automaker actually makes very good cars.

As a result, I think that GM’s recently announced alliances with Honda (NYSE:HMC), Renault (OTC:RNSDF), Nikola (NASDAQ:NKLA), and Uber (NYSE:UBER) will prove to be quite successful for GM and positive for GM stock. The deals will generally allow automobiles developed or partially developed by GM to be sold by other companies. GM of course will get a cut of the revenue and profits from the transactions.

GM’s strong technology, combined with  brand names that will resonate with younger Americans, proves to be very positive for GM and GM stock.  Plus, of course the deals should allow GM to save a significant amount of money on research and development.

The Street Is Beginning to See the Value of GM Stock

I’ve actually been upbeat on GM for years, but the Street hasn’t seen much value in the name, so the company’s shares have stayed largely range-bound.

With analysts and pundits starting to discuss the company’s virtues and the low valuation of GM stock, the Street’s view of the shares seems to be changing. For example, last month Barron’s proclaimed that “ Tesla (NASDAQ:TSLA)…stock seems unstoppable—but General Motors…shares are a better buy.”

The website noted that, at the time, Tesla stock was worth about “$1 million per vehicle delivered,” while GM stock was worth about 10% of that.

According to Barron’s, Morgan Stanley analyst Adam Jonas thinks that the value of GM’s EV business alone may be as much as $100 billion. The current market capitalization of GM stock is just $43 billion.

The Bottom Line

Given GM’s strong, upcoming EV lineup, the company’s new, smart alliance strategy, the strength of its EV technology. The warming of the Street towards GM stock, longer-term investors should buy the shares.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.


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