Citi Sees 40% Upside At GM, Says Market Ignoring Future Disruption

• Shares of General Motors Company GM were volatile in 2015 and are up 2 percent year-to-date.
• Citi’s Itay Michaeli maintained a Buy rating on the company, with a price target of $50.
• General Motors’ global scale and size should make it highly relevant in an era when driverless cars will be the trend, Michaeli believes.

Analyst Itay Michaeli mentioned that the general perception that all automakers are currently “disadvantaged at best and disrupted at worst” is not entirely off base, while broadly painting every automaker the same way.

Michaeli pointed out that while today’s popular ride sharing business models offer a limited role for automakers, the situation is likely to change in the era of driverless cars around 2020.

“The seemingly lucrative opportunities in mobility, data and social will likely spark an arms race where competing players will look to scale high-volume, low-cost driverless devices (globally), access critical vehicle & network data (where much value rests) and secure reliable service channels,” the Citi report noted.

Such a situation will make some and not all automakers relevant, with General Motors likely to emerge as one of the strong players, Michaeli mentioned. The company’s global size and scale, leadership with OnStar autonomous and EVs are its strengths.

General Motors’ pickup/SUV profit center franchise and smaller market share in certain US cities make mobility networks more of an opportunity. The company’s shares no longer deserve to trade at a discount to other domestic OEMs, the analyst added.