Should you buy Tesla or GM shares? Goldman Sachs tips them to outperform

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 27, 2021
  • Goldman Sachs tips Tesla and General Motors to do well despite supply chain difficulties.
  • The two stocks edged higher more than 2% on Monday after the analyst note.
  • They said Tesla is a leader in a higher growth EV market, while GM could benefit from the industry recovery.

On Monday, Tesla Inc. (NASDAQ:TSLA) and General Motors Co. (NYSE:GM) shares edged higher 2.82% and 2.24%, respectively after Goldman Sachs analysts issued an upbeat update amid the supply chain constraints.

Analyst Mark Delaney said the two companies remain resilient despite recent industry struggles citing Tesla’s market leadership as a key catalyst. He also added that General Motors could benefit substantially from the industry recovery.

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Delaney said operating margins and free cash flows play a key part when giving a stock a rating, with several buy stocks striking a good fundamental balance in the firm’s rating models. 

Is Tesla the better buy?

From a valuation perspective, Tesla shares seem steeply priced at a forward P/E ratio of 108.93. However, analysts expect its EPS to grow by 165% this year before rising at an average annual rate of about 51.76%. 

Therefore, while TSLA shares may not be appealing to value investors, growth investors could find them exciting for the long term. As a result, it may not be too late to buy the stock ahead of the company’s exciting growth story.

Source – TradingView

TSLA seems poised for a pullback after the bull run

Technically, Tesla shares seem to be trading within an ascending channel formation in the intraday chart. As a result, the stock has recently rallied to trade on the edge of overbought conditions of the 14-day RSI.

Therefore, a pullback could be imminent. As such, investors could target potential pullbacks at $746.13 or lower at $698.40, while $840.44 and $889.41 are resistance levels.

Or should you buy GM instead?

While Tesla offers exciting growth prospects, General Motors looks significant;y undervalued at a P/E ratio of 6.04, making the stock an exciting option for value investors. 

Analysts expect its earnings to fall by 5.3% this year before rising at an average annual rate of 13.25% over the next five years. 

Therefore, General Motors looks like a good short-term buy.

Source – TradingView

The GM rebound seems poised to continue after a channel breakout

Technically, GM shares seem to have recently completed an upward breakout from descending channel. However, the stock is still far from the overbought conditions of the 14-day RSI, leaving room for continued upward movement.

Therefore, investors could target extended gains at about $58.64 or higher at $63.90, while $48.35 and $43.02 are crucial support zones.

Bottom line: GM is the better short-term buy, while Tesla looks exciting long term

In summary, Tesla’s exciting growth prospects market the stock the better long-term buy, while General Motors’ discounted valuation is an attractive short-term investment. 

Therefore, it makes sense to buy GM now, and wait before betting on Tesla’s growth story.

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