It’s not the sexiest auto stock on the market and its CEO will never be mistaken for Elon Musk, but General Motors (NYSE:GM) stock is quietly having a strong 2021.
The increase for this traditional automotive powerhouse can be attributed in large part to a 21st century power move – the shift to electric and autonomous vehicles.
GM says it’s going to invest $27 billion on autonomous and electric vehicles through 2025. The company also says it plans to release 30 EV models by 2025.
With those moves alone, General Motors is emerging as a serious alternative EV name to Tesla (NASDAQ:TSLA), which has taken Wall Street by storm in the last few months as its stock shot up to stratospheric levels.
GM is betting that it can seize a portion of those profits. And it’s a pretty solid bet.
GM Stock at a Glance
General Motors stock is up 26% so far this year, but that’s not the only good news for investors.
Fourth-quarter earnings were $2.8 billion, or $1.93 per share, soundly beating the $1.60 per share that analysts expected. A year ago, revenue was only $72 million with EPS of 5 cents.
Sales jumped 23% on a year-over-year basis, from $30.8 billion in Q4 2019 to $37.5 billion in Q4 2020. That also beat analysts’ expectations of $36.2 billion in sales.
Looking ahead, GM guided for Q2 earnings of $8.5 billion and $9.5 billion. Adjusted free cash flow is expected to be between $11.5 billion and $12.5 billion.
Full-year revenue came in at $122.5 billion and EPS of $4.90, said CFO Paul Jacobson.
While 2020 was adversely impacted by production challenges experienced in the first half of the year, we demonstrated resilience and flexibility as we quickly moved to preserve liquidity and manage inventory while still launching an all-new lineup of our highly profitable full-size SUVs and prioritizing investments in our all-electric future.
Putting 2020 in the Past
For nearly everyone, 2020 was a year to put in the rearview mirror. Much of the same could be said for GM.
It started the year trying to recover from a six-week strike by 48,000 workers that cost GM $1.75 billion before ending in October.
Then came the novel coronavirus pandemic, which shuttered manufacturing, made millions jobless and slowed auto sales to a trickle.
Then GM was forced to back out of a $2 billion agreement with Nikola (NASDAQ:NKLA) after the electric truck company was dealing with fraud allegations raised by short-seller Hindenburg Research.
At one point, GM stock traded for $18 per share. But the company’s plans for electric and autonomous vehicles is changing all of that.
EV Plans
GM’s plans to invest in EVs and autonomous vehicles are ambitious. As InvestorPlace’s Wayne Duggan points out, Tesla only has four EV models; GM plans to have 30 on the roads by 2025. Tesla had a target to sell 500,000 EVs in 2020 and came up short. GM plans to sell twice that many in 2025.
Also, GM is already testing fully autonomous vehicles in San Francisco without driver monitors in the car. That’s impressive, considering perceived industry leader Tesla is still requiring a driver to be in the car and stay alert during its self-driving mode.
Now at about $52 per share, analysts are predicting that GM stock will continue its ascent.
RBC Capital raised its price target for GM from $52 to $67; Citi raised its price target from $70 to $85; Omega Advisors says it took a new position in GM stock for its fund in the fourth quarter.
The Bottom Line
GM CEO Mary Barra doesn’t have the flash or dynamic social media presence Tesla’s Elon Musk. She’s not working on shooting rockets into space or hawking cryptocurrencies. She’s just working on turning a legacy Detroit automaker into an EV and autonomous vehicle powerhouse.
So far, the company appears to be on the right track.
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article recently initiated a long position in TSLA. The InvestorPlace Research Staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.
