On Monday, BMO Capital Markets upgraded GM stock to an outperform rating, from market. The investment arm also increased the price target of GM stock from $38 to $41 per share. The moves signal to investors that they should buy GM stock.
Analyst Richard Carlson made the change to due two factors: the opportunity behind the GM Cruise autonomous vehicles division as well as GM’s ongoing restructuring of its core business.
“We expect a brighter spotlight to be placed on GM Cruise in 2019, leading to a more appropriate value for this business being priced into the shares,” said the analyst. “We believe restructuring efforts will drive better profitability and [free cash flow], as well as improve cyclical resilience”, he added.
Cruise
The GM Cruise division is actively working on a robotaxi service that it plans to launch in the near- to medium-term future.
GM Cruise Leadership – Dan Kan, Kyle Vogt, Dan Ammann
GM acquired Cruise in 2016 to leap ahead of other rivals, including new startups and traditional automakers, in the race to bring self-driving cars to market. In November, GM announced that its then-president, Dan Ammann, would take over as Cruise CEO starting January.
“We believe a key catalyst for GM shares in 2019 could be an increased valuation for GM Cruise being priced into the stock,” said Carlson.
Restructuring
Carlson added that the ongoing restructuring of GM’s core business operations should also help its shares climb after a disappointing 2018, during which time GM stock values fell over 18 percent.
GM Cruise AV prototype based on the Chevrolet Bolt EV
In November, GM announced plans to halt production at five plants and cut more than 14,000 jobs.
“Within the core business, we expect restructuring initiatives to drive higher profit margins and free cash generation, while also improving cyclical resilience, which should also drive a higher multiple,” he said.
GM stock rose 1.4 percent on the news on Monday, closing the day at $34.37. It then spiked to $35.64 in morning trading on Tuesday before closing the day at $34.81 per share.
Comments
Just saying
https://www.fool.com/investing/2019/01/08/solid-q4-sales-results-show-gm-is-on-right-track.aspx
Just sayin, juiced up Chevy sales by December employee pricing for all probably prevented a disastrous qtr, with a different article being written!
If only GM had highly desirable vehicles to match the technology! When we’re talking Camaro in last place or truck sales looses to Ram it just seems as if poor planning as led to a loss in market share. Sure, there is ATP discipline but Honda does the same with a highly regarded line up.
Going foreward GM brands will feel a further bite minus Opel R&D… just saying.
GM is no stranger to automation. They spent billions of dollars automating plants in the 80’s and found out it was a massive mistake. They could have bought Toyota outright and shut them down for the money they spent to automate these plants. Later to find out quality was terrible and it was a nightmare. I see cruise automation being the same turnout. We’ll throw billions upon billions into something while other products suffer and die. We are seeing it right now. Cruise is the new Saturn in town and itll suck all the other products dry of money. Just wait and see
If GM ignores automation, it’s ceding its share of the market to those who aren’t.
$41 by 2041?
Bank of Montreal (BMO) must be hoping for a strengthening CDN loonie.