Is General Motors a buy or sell after recently announced earnings?

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on Aug 5, 2021
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  • General Motors reported its second-quarter results this Wednesday
  • Total revenue has increased by 103.6% Y/Y to $34.2 billion
  • Wedbush Securities assigned a buy rating on General Motors with an $85 price target

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General Motors Company (NYSE: GM) shares have weakened from $59.7 to $52.2 since the beginning of July 2021, and the current price stands around $54. General Motors reported its second-quarter results yesterday and announced that it expects a full-year net income of between $7.7 billion and $9.2 billion.

Fundamental analysis: General Motors has a plan to become the EV market leader in North America

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General Motors continues to generate steady revenue and a healthy profit margin even though the Delta variant of the coronavirus continues to pose downside risks. This Wednesday, General Motors reported its second-quarter results; total revenue has increased by 103.6% Y/Y to $34.2 billion, while the GAAP EPS was $1.90 (beats by $0.42).

Total revenue has increased above the expectations (+$4.54 billion), and the company’s management announced that diluted earnings per share for the 2021 fiscal year should be between $5.12 and $6.12. General Motors expects a full-year net income of between $7.7 billion and $9.2 billion, while the adjusted EBITDA should be between $11.5 billion and $13.5 billion.

“While raw materials continue to be a significant year-over-year headwind as platinum group metals and steel prices have continued to increase this year, we have been mitigating the impact by managing several other factors, including pricing and mix, go-to-market strategies, record profits at GM Financial and other cost efficiencies, said Paul Jacobson, CFO of General Motors.

The company’s management expects some headwinds in the third quarter as commodity prices continue to rise, and the management expects second-half commodity expense to be at least $1.5 billion higher than the first half of the year.

General Motors continues to focus on speeding up electric vehicle adoption and commercialization of self-driving technology at scale, and the company will offer full range services that make EVs accessible to the largest possible customer base. General Motors has a plan to launch more than 30 electric vehicles globally by 2025 and become the EV market leader in North America.

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The company’s outlook remains stable, and Wedbush Securities assigned a buy rating on General Motors with an $85 price target. Dan Ives, an analyst from Wedbush Securities, said that General Motors is in a great position to take advantage of a $5 trillion electric vehicle market emerging over the next ten years.

Technically looking, General Motors shares could advance above the current price levels in August 2021, but this company is not undervalued with a market capitalization of $83 billion. General Motor stock has seen massive gains since October 2020, the book value per share is around $34, and GM’s dividend is currently suspended.

Technical analysis: $50 represents a strong support level

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Data source: tradingview.com

Shares of this company have been moving in an uptrend last several months, and if the price jumps again above $60, it would be a signal to trade GM shares, and we have the open way to $65.

On the other side, if the price falls below $50, it would be a strong “sell” signal, and the next target could be around $45. Traders should have in mind that if the U.S. stock market enters a more significant correction phase, the share price could be at much lower levels.

Summary

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General Motors reported its second-quarter results this week, and Wedbush Securities assigned a buy rating on General Motors with an $85 price target. General Motors continues to focus on speeding up electric vehicle adoption, and the company announced that it has a plan to launch more than 30 electric vehicles globally by 2025.

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