General Motors Company (NYSE:GM) is once again worth more than Tesla Inc (NASDAQ:TSLA). Not that this is helping GM shareholders. GM stock is down 13% so far in 2018 but Tesla is down 17%, as both companies try to scale production of electric cars and fight a rear-guard legal action against autonomous vehicles.
GM’s entrant in the low-cost electric race is the Chevrolet Bolt. It plans to double Bolt production later this year even though it is not advertising the car. It sold 26,000 Bolts last year, out of 160,000 total electrics, and thinks it can undercut the Tesla Model 3 on pricing.
Both GM and Tesla expect to pass 200,000 sales of electrics within the next few months. They are about even in market share.
GM also hopes to produce self-driving Bolts next year and then launch a car sharing business around them.
The Reinvention of GM
While Tesla has been doing this from a standing start, GM has been slowly reinventing itself under CEO Mary Barra.
It’s not easy. GM is losing share in Korea, it is renewing its Cadillac brand with an SUV, and it needs to maintain a dividend that currently yields 4.2%. The dividend is why investors buy the stock, and its yield badly trails that of Ford Motor Company (NYSE:F), which is at 5.4%.
While GM faces Tesla in electrics, it is facing Alphabet Inc (NASDAQ:GOOGL) and its Waymo unit in autonomy. It has been planning to have fully autonomous cars by next year, logging over 131,000 miles with 105 incidents where humans had to take over last year.
Analysts remain skeptical it can pull all this off. There are currently 24 following the stock , slightly fewer than half calling it a buy, expecting $1.28 per share of earnings on $34.12 billion of revenue when it next reports April 26.
Do We Need This?
The big question for analysts is whether the market wants any of this.
The Trump Administration is working to kill the mileage standards, the best-selling car in America remains the Ford F-150 monster pick-up truck, and the self-driving car crowd is getting caught in the backwash of the Facebook Inc. (NASDAQ:FB) scandal, with some questioning the cars’ need for data, and bicyclists wanting regulators to put the brakes on them.
But ready or not, Barra says, the future is coming. While GM works to get its Bolt ready for the self-driving revolution, Waymo says it is already there, and will turn 20,000 Jaguars into self-driving cabs for its coming ride-hailing service that could do one million trips per day by 2020. That’s two years from now.
Is GM Stock a Bargain?
Meanwhile, GM stock continues to languish at values that would shame any tech investor, as it has since it emerged from bankruptcy.
GM stock now sells for just five times its roughly $10 billion in annual operating income. It’s at barely one-third its annual sales – Costco Wholesale Corporation (NASDAQ:COST) sells at about half its revenue. Operating cash flow came in last year at over $17 billion, for a stock with a market cap of under $51 billion.
I don’t own GM stock, because I don’t expect capital gains from it (it’s up only 6% over the last year) and because Ford’s yield is a lot better. I prefer to root for it from the sidelines because it has 180,000 employees and is thus a proxy for U.S. manufacturing.
Barra has what may be the hardest job in America.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long Ford stock.
