Is General Motors Underappreciated As A Disruptor?

Disruptor Status

In a research report, the analyst highlighted a sell-side event hosted by General Motors' management that focused on the Chevy Bolt. The company demonstrated its capabilities in electrification and autonomous driving, both of which are important initiatives.

Johnson further suggested that while it is clear General Motors is collaborating with suppliers to improve electrification and autonomous driving, his sense is that the company is more intent on capturing and controlling a larger portion of the value chain.

"As we've noted in the past, GM management should focus on continuing to execute ('control what's within your control'), while also demonstrating that it is at the forefront of the disruptive changes in the auto industry," Johnson wrote.

Johnson added that General Motors' stock should "continue to work for now," however, it is not "out of the woods yet." The stock is trading at 6.5x 2017E EPS which makes it inexpensive compared to other auto makers. However, the company is still operating in an environment characterized by elevated incentives, declining residuals and rising interest rates.

Finally, Johnson argued that General Motors could benefit in the coming months from new product launches the company's inventory is also elevated and management may announce another production cut which could pressure the stock.

Shares of General Motors remain Neutral rated with an unchanged $36 price target.