General Motors Analysts React To Ambitious New Guidance: 'Story May Gain More Traction'

General Motors Company GM shares were gaining ground Thursday after the company updated its long-term financial guidance at its investor day event. 

The biggest headline number from day one of the event Wednesday was GM’s updated long-term guidance. The auto giant said it plans to double annual revenue to $280 billion by 2030. In addition to growing revenue, GM said it is targeting operating profit margins of between 12% and 14%. In 2020, GM reported an operating profit margin of just 7.9%.

Related Link: Tesla's High Stock Price 'Justified,' Analyst Says After Q3 Deliveries Beat

GM is projecting its traditional auto sales and financing businesses will grow from $138 billion annually to between $195 billion and $235 billion by 2030. In addition, GM is projecting new businesses, including the autonomous vehicle subsidiary Cruise and commercial EV business BrightDrop, will grow from $2 billion in annual sales to $80 billion.

GM is investing $35 billion in electric and autonomous vehicle technology through 2025 and plans to transition to full EV production by 2035.

GM’s strategy is to convince investors to value the company more like a technology company than a legacy auto company. In 2020, GM reported $122.4 billion in revenue and $6.4 billion in net profits. Electric vehicle competitor Tesla Inc TSLA reported just $31.5 billion in revenue and $721 million in net profits, yet Tesla’s $775-billion market cap dwarfs GM’s $78 billion.

The Transition From Auto To Tech: Bank of America analyst John Murphy said the sum-of-the-parts GM growth story “may gain more traction.

“In our view, the event was constructive, further illustrating GM as an industry leader in what we characterize as the Core to Future transition,” Murphy wrote.

Wells Fargo analyst Colin Langan said GM is evolving from an automaker to a software-as-a-service platform.

“We have increased confidence in GM's long-term strategy and are excited by the potential SaaS growth,” Langran wrote.

RBC Capital Markets analyst Joseph Spak said he remains bullish on GM because of the company’s optionality.

“GM likely doesn’t need all these opps to exactly play out as it indicated for [the] stock to be undervalued here,” Spak wrote.

High Expectations For GM: CFRA analyst Garrett Nelson said the event is setting a high bar for GM investor expectations in the years ahead.

“Only time will tell whether it will be able to deliver on its lofty pronouncements, but we view the risk of falling short as high,” Nelson wrote.

Wedbush analyst Daniel Ives said GM’s ambitious financial targets are not only achievable, but they're also beatable.

“We believe by 2026 GM will be able to convert 20% of installed base to EVs which remains the key to our re-rating thesis as part of this renaissance of growth happening in Detroit with the green tidal wave,” Ives wrote.

GM Ratings, Price Targets:

  • CFRA has a Hold rating and $55 target.
  • Bank of America has a Buy rating and $80 target.
  • Wells Fargo has an Overweight rating and $64 target.
  • RBC has an Outperform rating and $74 target.
  • Wedbush has an Outperform rating and $85 target.

GM's stock is up 4.5% to $56.39 at publication time.

GM CEO Mary Barra. Benzinga file photo by Dustin Blitchok.

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Posted In: Analyst ColorNewsGuidancePrice TargetReiterationTop StoriesAnalyst RatingsBank of AmericaCFRAColin LanganDaniel IvesGarrett NelsonJohn MurphyJoseph SpakRBC Capital MarketsWedbushWells Fargo
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