General Motors Isn't A 'Car' Stock

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Citi’s Itay Michaeli believes consensus expectations for General Motors Company GM are missing several industry- and company-specific drivers, such as the product cycle, pickup trucks, restructuring, OnStar, cost flexibility and more.

Michaeli reiterated a Buy rating on the company, with a price target of $50.

Gap Between Perception And Reality

“Within our coverage universe we continue to regard GM as having some of the biggest gaps between perceptions & realities,” the analyst mentioned.

Michaeli explained that the long-held bear perception argues the valuation of the stock reflects the perception that earnings are posed to collapse, or at least prove to be highly volatile, as the U.S. SAAR plateaus and global macro volatility impact the company.

However, General Motors’ past five quarters show a very different picture, having delivered another strong quarter in North America in 2Q against the backdrop of plateaued SAAR.

Losses in South America also declines, despite sales falling, while the margins and outlook in China have remained resilient.

Not Like Other ‘Car’ Stocks

“While GM is by no means immune from macro risks, its string of strong quarterly results in the face of a volatile macro doesn’t come as a coincidence, in our view,” Michaeli stated, adding that a closer look shows that General Motors is a very different investment story.

Although General Motors is viewed as a “car” company, unlike global “car” stocks, the majority of its North American profits come from the pickup truck segment, which “looks and acts nothing like the broader SAAR.”

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