Reports Q4 2020 results on Wednesday February 10, before opening
Expected Revenue: $ 36.1 Billion
EPS Forecast: $ 1.64
Detroit-based automaker General Motors (NYSE 🙂 has successfully diverted investor attention from its current challenges to its hopefully promising future, as it sees itself as a major player in the electric vehicle market. As a result, the stock is on a tear, while trading at an all-time high even when sales of new, conventional cars are a struggle during the pandemic.
In its bid to convince investors that it has a plan to survive in a market ruled by electric vehicles, the country's largest automaker will spend $ 27 billion by 2025 to develop electric and self-driving vehicles. GM's initiative is part of Chief Executive Officer Mary Barra's strategy to assume leadership of Tesla (NASDAQ 🙂 and move from a maker of gas-guzzling, carbon-spewing trucks and SUVs.
Barra said last month in a statement:
“Our team took on the challenge of transforming product development at GM and positioning our business for an all-electric future. What we've done is build a multi-brand, multi-segment EV strategy with economies of scale that can rival our full-size truck business with much less complexity and even more flexibility. "
At the heart of GM's strategy is a modular propulsion system and highly flexible third-generation global EV platform powered by proprietary Ultium batteries. This allows the company to compete for almost any customer in today's market, whether they are looking for affordable transportation, a luxury experience, trucks, or a powerful machine.
The strategy seems to be working and convincing other companies to become partners. Honda (NYSE 🙂 will use GM & # 39; s electric vehicle platform for upcoming models after deals struck last year, while Microsoft (NASDAQ 🙂 last month agreed with GM & # 39; s Cruise LLC, a self-driving car. startup in a deal that will bring the software. massive cloud and edge computing opportunities for the enterprise. electric vehicles. News on that front is also encouraging.
The Detroit auto maker posted a 4.8% increase in deliveries during the October-December quarter – the best fourth quarter for retail sales since 2007. Average transaction prices for the three-month period climbed to a record $ 41,886, suggesting GM's larger SUVs, such as the Chevrolet Tahoe and GMC Sierra pickups, are gaining market share. Due to the rebound in sales in the fourth quarter, GM had managed to limit the pandemic-caused damage until 2020, when it was down 12%.
The fourth quarter revenue turn, combined with EV joint ventures and potential cost savings from the company's North American restructuring, are driving GM stock price up this year. The stock closed at $ 56.90 yesterday after rising 50% in the quarter.
Argus Research analyst William Selesky said in a recent note that also upgraded to GM to buy off hold:
"We believe investors have undervalued the company's strength in traditional combustion vehicles, as well as the Chinese joint venture Ultium Battery and financial services companies."
Bottom Line
The current momentum of General Motors clearly shows that the automaker has a plan to survive the EV revolution and that its current operations have the power to fund that transition. Tomorrow's earnings report could very well depict that story.
