General Motors Shares Jump Over 6% After Earnings Beat Estimates; Target Price $46

General Motors, an American multinational corporation that was the world’s largest motor-vehicle manufacturer in the 20th century, reported a better-than-expected profit in the third quarter as demand bounced back in the two economic giants, U.S. and China – sending its shares up over 6% in pre-market trading on Thursday.

The auto manufacturer reported net income of $4 billion, or $2.78 a share, compared with $2.35 billion, or $1.60 a share, a year earlier. Excluding one-time items, it earned $2.83 a share, higher than the market expectations of $1.38 a share.

General Motors reported an EBIT-adjusted margin of 14.9% driven by a strong product lineup, disciplined pricing and cost actions. Strong automotive liquidity of $37.8 billion; expect to repay revolver balance by year-end.

“Strong headline beat in Q3 with FCF $9.1bn fully reversing the Q2 cash flow drain. NA EBIT flattish y-o-y adjusted for UAW strike last year but impressive 15% margin. Low inventories support further balance sheet repair in Q4,” said Philippe Houchois, equity analyst at Jefferies.

General Motors shares climbed 6.07% higher to $37.38 in pre-market trading on Thursday; however, the stock is down about 4% so far this year.

Executive Comments

“Sales in the U.S. and China are recovering faster than many people expected, and GM is benefiting from robust customer demand for our new vehicles and services, especially our full-size pickups and SUVs. These strong fundamentals and the positive impact of our transformation and austerity measures are helping us to deliver solid earnings, generate significant cash and quickly repay the debt we incurred during the early days of the pandemic,” said John Stapleton, Interim CFO.

General Motors Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $42.69 with a high forecast of $65.00 and a low forecast of $20.00. The average price target represents a 21.14% increase from the last price of $35.24. From those 13 analysts, 11 rated “Buy”, one rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $46 with a high of $68 under a bull-case scenario and $15 under the worst-case scenario. The firm currently has an “Overweight” rating on the motor-vehicle manufacturer’s stock. General Motors had its price objective hoisted by equities researchers at Barclays to $40 from $39. The brokerage presently has an “overweight” rating on the auto manufacturer’s stock.

Several other analysts have also recently commented on the stock. Zacks Investment Research lowered shares of General Motors from a “buy” rating to a “hold” rating and set a $32 price objective for the company. Bank of America increased their target price on General Motors from $60 to $65 and gave the company a “buy” rating. Royal Bank of Canada raised their price objective to $44 from $39 and gave the stock an “outperform” rating. UBS Group boosted their target price to $34 from $27 and gave the company a “buy” rating.

We think it is good to buy at the current level with a target of $46 as 100-day Moving Average and 100-200-day MACD Oscillator signal a buying opportunity.

Analyst Comments

“We are ‘Overweight’ based on its strong portfolio diversification across: General Motors  (GM) brands, as well as EVs, ICE and AVs. It also has leading North American margins, generates strong cash flow, and has a strong balance sheet. We believe the market is underestimating the SOTP of the GM enterprise via: 1) Legacy ICE, 2) GM EV, 3) GM’s Ultrium Battery business, 4) China JVs, 5) GM Finco, 6) GM Cruise, and 7) hidden franchise value in brands such as Corvette,” said Adam Jonas, equity analyst at Morgan Stanley.

“GM management has a proven track record to allocate capital away from structurally challenged areas towards re-positioning the business model.”

Check out FX Empire’s earnings calendar