General Motors Company: Automobiles
Key arguments in support of the idea.
• GM's ongoing buyback programs could significantly reduce the number of
shares outstanding.
• The Company's Q2 results are likely to come in above expectations. New car
prices in the U.S. remain high.
• Momentum effects could support further upside for the stock.
Investment Thesis
General Motors Company is one of the largest automakers in North America,
involved in all aspects of the industry from vehicle design to the sale of finished
cars and parts. GM subsidiaries and joint ventures sell vehicles under the Chevrolet,
Buick, GMC, Cadillac, Baojun and Wuling brands.
On June 11, GM's Board of Directors adopted an additional $6 billion share
buyback program. Late last year, the automaker announced a large-scale program
to accelerate the repurchase of its own shares from the market (ASR) amounting to
$10 billion. The program was implemented in the first quarter of this year. GM will
spend another $1.1 billion to buy back its own shares by the end of the second
quarter. Thus, in addition to these payments, the Company can now spend up to
$6 billion on buybacks. We see GM increasing its profit distribution to shareholders
once again. According to our automotive analyst Michael P. Ward (CFA), the total
number of GM shares outstanding will fall to less than one billion by 2025 (30%
lower than the number of shares outstanding as of Q3 2023).
The new buyback program is a signal that we are in for a strong Q2 financial
performance. We expect North American auto sales to bring GM $3.8 billion in
operating profit for Q2, which is in line with Q1 2024 figures. Stable shipment
volumes and strong auto prices should support earnings for the current quarter.
The Company's total adjusted operating profit for the quarter may reach $4.0
billion (+25% y/y), while net income may rise to $3.16 billion (+23% y/y). The FactSet
consensus forecast suggests that net income will come in at $2.88 billion.
Technical factors also speak in favor of continued growth of GM stock price.
Since the end of 2023, GM shares have been on an upward trend, with each new
local high exceeding the previous one, as well as the lows. Additionally, since the
beginning of 2024, GM securities have demonstrated a significantly higher return
compared to the S&P 500 Index. This indicates the relative strength of the stock, a
positive factor from a technical perspective.
Shares of General Motors Company present an attractive buying opportunity,
especially considering that the financial results for the current quarter could
surpass expectations.
The target price for the Company is $55. We recommend to set the stop-loss at
$42.
• GM's ongoing buyback programs could significantly reduce the number of
shares outstanding.
• The Company's Q2 results are likely to come in above expectations. New car
prices in the U.S. remain high.
• Momentum effects could support further upside for the stock.
Investment Thesis
General Motors Company is one of the largest automakers in North America,
involved in all aspects of the industry from vehicle design to the sale of finished
cars and parts. GM subsidiaries and joint ventures sell vehicles under the Chevrolet,
Buick, GMC, Cadillac, Baojun and Wuling brands.
On June 11, GM's Board of Directors adopted an additional $6 billion share
buyback program. Late last year, the automaker announced a large-scale program
to accelerate the repurchase of its own shares from the market (ASR) amounting to
$10 billion. The program was implemented in the first quarter of this year. GM will
spend another $1.1 billion to buy back its own shares by the end of the second
quarter. Thus, in addition to these payments, the Company can now spend up to
$6 billion on buybacks. We see GM increasing its profit distribution to shareholders
once again. According to our automotive analyst Michael P. Ward (CFA), the total
number of GM shares outstanding will fall to less than one billion by 2025 (30%
lower than the number of shares outstanding as of Q3 2023).
The new buyback program is a signal that we are in for a strong Q2 financial
performance. We expect North American auto sales to bring GM $3.8 billion in
operating profit for Q2, which is in line with Q1 2024 figures. Stable shipment
volumes and strong auto prices should support earnings for the current quarter.
The Company's total adjusted operating profit for the quarter may reach $4.0
billion (+25% y/y), while net income may rise to $3.16 billion (+23% y/y). The FactSet
consensus forecast suggests that net income will come in at $2.88 billion.
Technical factors also speak in favor of continued growth of GM stock price.
Since the end of 2023, GM shares have been on an upward trend, with each new
local high exceeding the previous one, as well as the lows. Additionally, since the
beginning of 2024, GM securities have demonstrated a significantly higher return
compared to the S&P 500 Index. This indicates the relative strength of the stock, a
positive factor from a technical perspective.
Shares of General Motors Company present an attractive buying opportunity,
especially considering that the financial results for the current quarter could
surpass expectations.
The target price for the Company is $55. We recommend to set the stop-loss at
$42.
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