General Motors shares advanced as Bank of America raised its target to $65

General Motors shares advanced as Bank of America raised its target to $65
Written by:
Stanko Iliev
26th October, 22:56
  • GM will build electric vehicles and the total investment will be around $2B
  • The new Cadillac LYRIQ will be the first EV produced at Spring Hill
  • Bank of America has a buy rating on GM and a price objective of $65

General Motors (NYSE: GM) shares have advanced from $28.5 above $38 in less than several weeks and the current price stands around $35.82. General Motors has found strong support above $30 but the price is still not able to surpass $40 resistance.

Fundamental analysis: Even with the COVID-19 pandemic, the business of GM is going well

General Motors is one of the largest automobile manufacturers and it is ranked #18 on the Fortune 500 rankings of the largest United States corporations by total revenue. The next several months will be competitive for the global auto industry but even with the COVID-19 pandemic, the sale of GM cars is going well.

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General Motors sales in the U.S fell 10% in Q3 to 665,192 vehicles which is not bad and above expectations. The Chevrolet brand experienced the best quarter ever with 45% growth, while the Cadillac brand has also 45% growth.

“While the economy has made a substantial rebound in the third quarter, retail auto sales have been even more resilient,” said GM Chief Economist Elaine Buckberg. “Super low auto loan interest rates have boosted retail auto sales; yet more strength comes from pandemic-induced demand.”

If we compare total stockholders’ equity of $43B and the market capitalization of $52.7B, we can notice that this stock is not overvalued and maybe now could be a good time to trade General Motors shares. Another useful information for potential investors is that this company has paid more than $6B dividends to its shareholders in the last three years and this number can be even bigger in the future.

Bank of America has a buy rating on GM and a price objective of $65 which is a little optimistic in my opinion. The price of the stock advanced after the company reported that GM will be a strategic manufacturing partner of Nikola.

According to this deal, Nikola will utilize General Motors’ Ultium battery system and Hydrotec fuel cell technology which will add value to both companies. The company also unveiled plans to build electric vehicles and the total investment will be around $2B.

The new Cadillac LYRIQ will be the first EV produced at Spring Hill and this will certainly add new customers and increase the revenues of the company. This stock could be a good long-term investment but maybe now is not the best time for investing in General Motors shares because the price could weaken in the upcoming weeks.

Technical analysis: Bulls remain in control of the price action

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $32 and $30, $38 and $40 represent the resistance levels. If the price jumps above $38 it would be a signal to buy General Motors stock and we have the open way to $40.

Rising above $40 supports the continuation of the bullish trend and the next price target could be located around $45. On the other side, if the price falls below $30 it would be a strong “sell” signal and we have the open way to $25.

Summary

Bank of America has a buy rating on General Motors and a price objective of $65 which is a little optimistic in my opinion. Even with the COVID-19 pandemic, the business of GM is going well and the company announced recently that will start to build electric vehicles. There are also some risks when it comes to trading General Motors shares but as long the price of GM is above $30 this stock remains in the bull market.

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