GM Notches Upgrade On 'Resiliency,' Next-Gen Mobility

General Motors Company GM has been tagged a disputed leader in autonomous and electric consumer vehicles, and the perspective is gathering momentum.

The traditional automaker converted a bear to a bull Tuesday to tally its 13th Buy rating against eight Holds and three Sells.

The Rating

RBC Capital Markets analyst Joseph Spak upgraded General Motors from Sector Perform to Outperform and raised the price target from $51 to $52.

The Thesis

Optimism around General Motors is strengthened by the firm’s place in mobility services and a third-quarter earnings beat, Spak said. It's given RBC “increased confidence on downturn resiliency," he said in a Tuesday note. (See Spak's track record here.) 

“It remains to be seen if GM can win on the robotaxi opportunity, but it has a seat at the table,” Spak said. “And it's early enough in the story that we still see a lot of potential for that narrative to take hold and for growth/tech investors to look to GM, increasing demand for shares and potentially the multiple.”

Spak anticipates better-than-expected North American profitability driven by outperformance in pickup trucks. This factor alone justified an increase in RBC's 2018 earnings per share estimates for GM from $5.60 to $6.30 — 9 percent above consensus. It also reinforced confidence in a 10-percent margin target.

General Motors’ South American segment is also expected to recover, with a 40-percent reduction in its break-even point and an improved outlook for Brazil, Spak said. 

At the same time, RBC forecasts capital efficiency improvements through the T1 and GEM platform launches, the leveraging of China joint ventures and a pullback in investments in next-generation passenger cars.

Price Action

At the time of publication, General Motors was trading up less than 1 percent at $42.47.

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