Wall Street Begins To Recognize GM’s Autonomous Vehicle Efforts
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Last week, RBC Capital Markets’ Joseph Spak raised the outlook of GM shares to “outperform” while raising the price target to $52 per share – a 23 percent increase from its value of $42.63. Spak’s revised performance rating was primarily based on his assessment of GM being more resilient than before as well as the expectations that North American truck sales, which account for a significant portion of GM’s revenue and profits, will remain healthy over the next 12 months. But there was more to the story.
Spak’s note also stated that GM could be a player in the budding robo-taxi and autonomous vehicle industry. The automaker has invested heavily in autonomous vehicle technology which the analyst wrote could potentially be a “game changing paradigm shift” for GM.
“We believe autonomous will first permeate in urban areas where the cost/mile is very high which is likely why GM is testing in those locations. Interestingly, GM is typically under-represented in urban areas so the cannibalization of itself is lower and shared autonomous looks to be an incremental opportunity for GM,” wrote Spak. “Only time will tell whether we and/or GM are right on the opportunity. But from a stock perspective, because GM has a seat at the table, we see an opportunity for new investors.”
In March 2016, GM acquired autonomous vehicle start-up Cruise Automation for slightly more than $1 billion. Since then, the automaker has integrated and expanded the division – now simply known as Cruise. In early December, the unit announced the fourth generation of its autonomous driving car based on the Chevrolet Bolt EV.
In a recent earnings call, GM Chairman and CEO Mary Barra stated that the company is working on the feasibility of autonomous driving and the company’s new ride-sharing platform.
“We’re exploring many options and we could partner with someone, partner with many or work on our own, the Cruise application that is being used with our employees,” she said.
GM shares closed Wednesday (December 27th, 2017) down 0.49 or 1.17 percent to $41.31 per share.
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The tech aspect has contributed but it is also that GM has controlled cost and been paying a dividends while doing this.
Many are tired of investing in tech stocks that show much promise but so little return unless they sell off.
You just restated the story in less eloquent terms.
Spak’s revised performance rating was primarily based on his assessment of GM being more resilient than before as well as the expectations that North American truck sales, which account for a significant portion of GM’s revenue and profits, will remain healthy over the next 12 months. But there was more to the story.
Key words: more resilient!
“Robo taxi” will eventually pay off big time but that’s still years, if not over a decade, away…Many have tried to guessimate how much it costs Cruise/GM to outfit a new Bolt EV with the Cruise autonomous gear and most believe it’s anywhere for $50K-$150K…Simply comes down to “compared to what”, if one wants a ride somewhere, Uber/Lyft estimate a $8 ride while the robo-taxi wants $12, who will that person most likely hail for a ride? With that being said, expect a lot of major metros to subsidize robo-taxi rides to accelerate adoption however the robo-taxi needs to beat all competition in price (which it will eventually) in order to get that huge payoff…
GM has huge room to grow in urban America. Living in NYC I see a lot of imports. As for Detroit-born, FCA is best represented and Ford has grown over the last decade but, aside from GMC and Escalade as livery in Manhattan, GM is barely visable.
Chevrolet and especially Buick have great room to grow. An electric Regal, like Encore, would be a quirky white space filler that would interest Lexus and Acura buyers.