General Motors (NYSE:GM) has strong, positive near-term and long-term catalysts. Given these very powerful drivers, which are still vastly under-appreciated. GM stock is tremendously undervalued at its current levels.
Among the automaker’s positive catalysts are its strong sales growth in the U.S. and China, its positive outlook in both nations, and its many upcoming electric vehicles.
I believe, however, that GM’s strongest longer-term drivers are its Cruise subsidiary and the improvement of its reputation in the U.S.
Poised to become one of the world’s leading providers of self-driving services, Cruise is likely to make GM a disruptive company.
On July 1, GM reported that its U.S. vehicle sales had jumped 40% year-over-year in the second quarter, versus the same period a year earlier, reaching 688, 236.
Delivering record Q2 sales were GMC, the automaker’s large-vehicle unit, its Buick brand of sedans, and GM’s flagship electric vehicle, the Bolt.
“The U.S. economy is accelerating, consumer spending is robust and jobs are plentiful,” GM chief economis Elaine Buckberg said. “Consumer demand for vehicles is also strong, but constrained by very tight inventories. We expect continued high demand in the second half of this year and into 2022.”
Additionally, the transition to the suburbs and some continued worries among parts of the U.S. population should help keep demand for new vehicles in the country quite strong for some time.
A Closer Look at GM Stock
In China, the vehicle deliveries of GM, along with those of the company’s joint ventures, climbed 5% YOY in Q2, exceeding 750,000 vehicles.
Some of the best-selling vehicles in China for GM were large automobiles, led by Cadillacs and Buicks. Another big seller was the Wuling Hongguang MINI EV, launched by Wuling, one of GM’s joint ventures in the Asian country.
The very affordable EV, which has a starting price tag of $4,200, has sold very well in China.
In Q2, Wuling delivered a record 85,000 Hongguang EVs in China, helping the joint venture’s sales jump a very impressive 28.4% YOY.
The strong popularity of the Hongguangs in China should strengthen Wuling’s brand in the country, helping the joint venture to continue greatly increasing its sales of other vehicles there.
Driven primarily by the power of word-of-mouth, the sales of the Hong Guang EVs themselves should continue to climb rapidly.
Moreover, GM has multiple, other strong brands in the nation, and China’s economy is still growing fairly rapidly. I think it’s clear that GM’s sales in the nation are poised to continue climbing significantly.
Cruise and GM’s Improving Reputation
Cruise, GM’s subsidiary that has developed self-driving technology, in April signed a deal to bring “self-driving taxis and ride-hailing services” to Dubai.
In another key development for the unit and for GM, last month, California agreed to allow Cruise to begin providing rides in driverless cars to consumers in the state.
Those developments indicate that Cruise is prepared or nearly prepared to launch true self-driving vehicles.
I believe that, by 2023, when Cruise’s Origin vehicles are expected to launch and the Dubai deal is slated to begin, Cruise will start operating driverless shuttles in many places.
In his June 25 column, Motley Fool writer Travis Hoium stated that, by saving consumers a meaningful amount of money, Cruise can create an enormous market for itself. He added that GMis positioned to be an autonomous-driving leader.
I completely agree with both of those statements.
Propelled by the many electric vehicles that GM is developing and the success of Bolt, the Volt and its trucks, the company’s reputation has greatly improved in the U.S.
In the 80s, 90s and the first decade of the new millennium, GM’s reputation in America was awful. That situation has changed tremendously now, and Cruise will only speed up the trend in the coming years.
On the negative side, it’s true that the recent trouble that GM had with the Bolt was somewhat worrisome. But I’m confident that the automaker will quickly fix the problem and that it will be quickly forgotten.
The Bottom Line on GM Stock
In both China and the U.S., GM is doing very well, and its strong performance is poised to continue in both nations.
Meanwhile, the company’s rapidly expanding EV lineup and Cruise are going to greatly improve its financial results and reputation in both countries.
Despite all of these positive drivers, GM still has a tiny forward price-earnings ratio of just 8.6. As a result, all investors should buy GM stock.
On the date of publication, Larry Ramer held a long position in GM.
Larry has conducted research and written articles on U.S. stocks for 14 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.