There is now more than one potentially winning bet when it comes to the electric vehicle segment of the car market. Lately, investors have been looking beyond Tesla (NASDAQ:), focusing instead on the traditional American automakers who have big plans to win this race. One such contender is General Motors (NYSE:).
Shares of Detroit-based GM are up more than 40% this year, far ahead of the returns achieved by EV market leader Tesla over the same period. A major reason behind this momentum is the company's ambitious plan to transform itself into a leading electric vehicle manufacturer over the next five years.
GM announced last month that it was increasing its investment in new technology for the second time in eight years. months with plans to spend $35 billion on more than 30 plug-in vehicles and four battery plants by 2025. As part of this expansion, the largest US automaker will build two battery plants, one in Tennessee and another in northeast Ohio, near their Lordstown assembly plant. GM plans to add two more plants in addition, but has not disclosed locations. According to media reports, GM's EV plans will accelerate later this year as a Hummer pickup and Cadillac Lyriq sports car. start rolling off the production lines. An electric Chevy Silverado pickup is also on the way. In China, GM's cheaper Hongguang Mini EV, which it produces with two state-owned companies, is a hit. More than a quarter of a million of the models have been sold since the vehicle launched last July, according to a report in Bloomberg, outperforming international rivals such as Tesla's Model 3 and local competitors including Great Wall's ( SS:) Ora Black Cat. ]
In a recent statement, Mary Barra, GM's Chief Executive Officer, said:
"GM targets annual global electric vehicle sales of more than 1 million by 2025, and we are increasing our investments to scale faster as we see momentum building in the United States for electrification, along with the customer demand for our product portfolio."
Analysts bullish on GM stocks
Wall Street analysts appear to be meeting the largest US automaker and setting higher price targets for its stocks. Based on estimates from 15 Wall Street analysts, the average price target represents a 25% increase from GM's closing price on Friday of $58.06, according to TipRanks.com.
Wedbush analyst Dan Ives told clients in a note last week that the stock had a significant advantage after starting GM's coverage with an "Outperform" rating. "We believe that as GM proves its EV vision in the coming years, the stock will be judged more as a disruptive technology and EV play, rather than the traditional car valuation," the note said, adding that the company with its battery program could capture market share from pure-play electric car companies Wedbush set a price target of $85 apiece for GM, which is roughly 52% above $58.76, where the stock closed on Friday. Wedbush shares rise even higher."With the software and services business complementing advancing battery technology, we believe GM is in an excellent position to double its market cap in a [sum of the parts] valuation against the end of 2022,” the note said.
With the company's electrical pressure, it is also showing strength, taking advantage of the pandemic-induced surge in demand. Higher revenues and earnings growth from the GM Financial loan unit will boost first-half adjusted earnings before interest and taxes from a previous estimate of $5.5 billion to a whopping $9.5 billion, GM said in its latest guidance. Bottom Line
In the group of traditional automakers, GM stock is a good bet for the future of transportation. Existing EV models are in high demand, while future plans are taking shape faster and earlier than expected.
