U.S. cars sales have bounced, sitting just below pre-pandemic levels.
Justin Sullivan/Getty ImagesGeneral Motors stock is rallying for three reasons: Cyclical, secular and company specific actions have all helped shares.
As a result, analyst price targets are rising, and now one of them thinks GM shares can eventually hit $100. That price would make the stock a roughly three-bagger in Wall Street parlance—that is, nearly tripling in price from recent levels.
The recent rally has been significant. General Motors shares (ticker: GM) are up 39% over the past three months. Both the S&P 500 and Dow Jones Industrial Average are up less than 2% over the same span.
The recovery of the overall auto market is the cyclical factor. Chinese and European auto sales are up year over year, rebounding off pandemic-induced lows. U.S. cars sales have also bounced, sitting just below pre-pandemic levels.
The recovery has happened faster than expected, leaving U.S. auto dealers with low inventories, which is good for GM production and pricing.
GM Is also benefiting from trends toward electrification. That is the secular trend helping some auto stocks. GM isn’t a pure play electric-vehicle player like Tesla (TSLA), but the company has invested heavily in EV technology, spending billions retooling plants to ready more EV models for production and launch.
Wall Street is also starting to evaluate other businesses inside GM, after the company announced plans to supply battery and fuel-cell technology to Nikola (NKLA). GM might take an 11% stake in the trucking start-up, but terms are still being negotiated. Before the deal, analysts were paying less attention to new, stand-alone businesses that might emerge from the century-old auto maker.
Citigroup analyst Itay Michaeli focused on the secular and company-specific trends in a Monday research report, previewing earnings that are due out Nov. 5. He thinks GM could eventually spin off its autonomous-driving technologies and EV platforms into stand-alone businesses.
New disclosures and spinoffs are on his wish list. But if GM undertook his ideas, Michaeli thinks shares could trade for more than $100, athough his official price target is $57 a share, up from $54.
Other Wall Street analysts have been increasing price targets too. GM’s average analyst price target is up almost $7, or 20%, over the past three months to more than $42 a share.
That still implies additional gains of more than 20% based on Monday’s closing price of $34.55 a share.
Year to date, GM shares are down about 6%.
Write to Al Root at allen.root@dowjones.com
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GM Stock Has Been Rallying. One Analyst Thinks It Could Triple From Here. - Barron's
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