Market predictions are hard. With so many different contributing factors to take into consideration, things don’t always pan out as expected. Case in point: back in 2017, Barron’s predicted that GM stock would see a 35 percent spike following the sale of Opel. In truth, GM shares only climbed only a few percentage points.
Thing is, Barron’s original prediction was pretty well-informed. In February of 2017, Barron’s reporter Jack Hough wrote that following the sale of Opel, GM stock valuation would rise as much as 35 percent in a year.
The prediction made sense. After all, GM wasn’t making any money on Opel. For years, GM Europe either broke even or dipped into the red, but profits were never really a strong possibility.
Opel was a sacred cow of sorts for GM, as it had been with the company for roughly 100 years. So, rather than offload it, GM made several attempts to turn it around, hoping to push it back into the black after decades of losses. Even so, a best-case scenario included $1 billion to $2 billion in profit a year, the same amount of money GM makes in the U.S. in a quarter.
Unfortunately, none of the attempts to turn the division around were successful under GM, while PSA recently managed to make $978 in profit on Opel. What’s more, The General couldn’t simply shudder the operation, giving how difficult it is to close plants and lay off employees in Europe. At the time, GM Europe had some 36,000 employees across 23 plants and a central office.
So then, with Opel being such a liability and draining so much cash, it was a worthwhile prediction that GM stock would see a significant spike following its sale. But what really happened?
On February 1st, 2017, just a few weeks before Barron’s made its report, GM stock was valued at $36.84. On March 1st, 2017, a few days before the sale was finalized, the stock was valued at $35.36, while on May 1st of 2017, about two months after the sale, the stock was at $33.93.
As of this writing (8/15/2019), GM stock is trading at $36.23 per share.
|Date||Valuation||% change from Feb 2017|
Essentially, GM stock has seen a 2.5 percent growth since March of 2017, pretty far from the 35 percent spike originally predicted.