General Motors: Company history & stock news

The American company General Motors (GM) dominated the motor vehicle industry for the majority of the 20th and 21st centuries. It has operations in the US, Canada, and numerous other nations, including manufacturing, assembly, and distribution centres. In addition to financial services, the company’s main products are engines, cars and trucks, and automotive components. Detroit is home to GM’s corporate office.

General Motors: Early history & expansion

William C. was the founder of General Motors (GM) in 1908. Durant through the merger of numerous automakers, including Buick, Oldsmobile, Cadillac, and others. Hand cranks became outdated in 1912 when General Motors introduced the electric self-starter in the Cadillac, revolutionising the industry. Following its 1916 reorganization, GM grew by purchasing Fisher Body and Frigidaire in 1919, as well as Chevrolet and Delco Products in 1918.

Following Durant’s departure in 1920, Alfred P. Sloan, Jr. reorganised General Motors (GM) into five primary divisions, namely Cadillac, Buick, Pontiac, Oldsmobile, and Chevrolet, all of which were centralised and constituted a model for other industrial companies. Sloan pioneered yearly model changes for cars, increased GM’s sales, and established customer financial backing.

As the leading American automaker by 1929, GM overtook Ford and went global with Holden (1931), Opel (1929), and Vauxhall (1925). GM rose to the top of the global automotive industry in 1931 and by 1941 accounted for 44% of the US market.

GM stock analysis: Expert insights

The $51.38 billion company manufactures, markets, and provides auto repair services for automobiles, trucks, and components under the four primary brands of GMC, Cadillac, Buick, and Chevrolet. After declaring bankruptcy in 2009, General Motors has come a long way to become one of the best-managed automakers globally.

Over the past year, the market as a whole has not performed as well as the shares of this significant automaker. Over this period, GM has increased its value by 40.5%, while the S&P 500 Index ($SPX) has increased by almost 28.3%. GM’s stock has increased 26.6% in 2024 alone, exceeding the SPX’s 11.3% year-to-date gain.

When comparing GM to SPDR S&P Kenso Smart Mobility ETF (HAIL), the difference in performance is more prominent. The exchange-traded portfolio has substantially underperformed GM over the last year, having only gained 2.6%. Furthermore, the ETF lost money during the same period of time as compared to the stock’s high double-digit gains.

General Motors shares

Following the release of the company’s Q1 earnings report, which exceeded Wall Street’s forecasts for revenue and profit, GM shares increased by more than 4%. In addition, GM raised its estimated adjusted earnings range for the full year to $12.5 billion to $14.5 billion, or $9 to $10 per share, from twelve billion dollars to fourteen billion dollars, or $8.50 to $9.50 per share as previously projected.

In the upcoming fiscal year, which concludes in December, analysts project a 22.4% increase in GM’s diluted earnings per share to $9.40. The record of the company’s earnings is surprisingly remarkable. In all four of the previous quarters, it exceeded the consensus estimate.

The consensus opinion among the 22 analysts that follow GM stock is “Moderate Buy” based on 13 “Strong Buy” ratings, 1 “Moderate Buy,” 7 “Holds,” and 1 “Strong Sell”.

With a price target of $56, RBC Capital recently kept its “Buy” rating on GM stock, suggesting a potential gain of 23.1% from current levels.

At $52.60, the average price target is 15.6% higher than GM’s current prices. The ambitious upside potential of 111% is suggested by the Street-high price target of $96.

Four risks investors in General Motors should know

The GM stock is traded at a mid-single digit PE multiple for a reason. The following are some of the main risks and difficulties the business is facing:

Peak earnings and car prices

Ford and GM have been making good profits lately, taking advantage of the robust demand and pricing for SUVs, trucks, and pickups in North America. Nonetheless, there are worries that future price reductions may negatively impact automakers’ profit margins. A portion of the market is avoiding cyclical names like GM, and forecasts of a slowdown in the US economy are not helping the situation.

Increased inventory

General Motors concluded the first quarter of the year with 63 days of inventory, more than it had predicted.

EV losses

In spite of the remarkable success of the legacy automakers’ internal combustion engine (ICE) divisions, they are troubled by losses in their electric vehicle (EV) divisions, and GM is no different. EV pricing may continue to be a barrier in the short to medium term given the price war started by the leader of the US EV market, Tesla (TSLA).

Losses in the business globally

GM suffered losses across China and other global markets in Q1, despite the company’s ongoing success in North America. GM’s China business, which was once a profitable venture, is the source of particular concern. Since then, domestic automakers have increased competition, changing the macrodynamics on the mainland and causing foreign companies like General Motors to lose market share.

Cruise self-driving unit

GM’s self-driving unit Cruise was forced to halt operations last year due to underwhelming results, but they have since resumed. The cash-guzzling company may require additional funding, which could put a pressure on GM’s otherwise robust cash flows.

Reasons why concerns about General Motors may be overstated

First off, the U.S. economy is doing rather well. Although rate cuts by the Federal Reserve seem unlikely in the near future, they should still be possible later this year. GM’s electric vehicle (EV) business is still expected to see volumes in the range of 200,000–300,000 in 2024, with an uncertain profit in the second half of the year.

Additionally, it projects mid-single-digit margins for its electric vehicle business by 2025. Even though there will be challenges in delivering EV profitability due to declining demand and pressure on prices, GM is optimistic that it can succeed.

For the remainder of the year, GM anticipates that business in China will be profitable. CEO Mary Barra stated that GM is “committed to China” in the long run, despite analysts questioning whether GM might think about selling that division, as it did with a number of other foreign markets.

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