GM Stock Value Drops 2 Percent During Week Of April 20 – April 24, 2020

The value of GM stock fell during the April 20^th, 2020 to April 24^th, 2020 timeframe. Shares closed the week at $21.95 per share, which represents a decrease of $0.53 per share, or more than 2 percent, compared to last week’s closing value of $22.48.

Movement & Ranges

By comparison, shares of GM’s cross-town rival, the Ford Motor Company, decreased $0.25 per share, or 5 percent, this week.

GM Stock Factors

A little over a month ago, GM stock value closed at a mere $16.80 per share. The fact that share values have recovered from last month’s blow may be surprising to some, and not so surprising to others. It’s worth pointing out that this is the first instance of value moving in the same direction two weeks in a row. Unfortunately, in this case, that movement was downward. As such, the future of GM stock is uncertain, though that depends on who you ask. Generally speaking, there are currently two schools of thought when it comes to investing in GM.

On the one hand, some still think that, due to the complications caused by the ongoing COVID-19 outbreak, things will get worse before they get better. Deutsche Bank Analyst Emmanuel Rosner recently wrote in a report that GM has about “15 [to] 17 weeks of liquidity under shutdown conditions before hitting its minimum cash levels.”

Indeed, a scenario like the current one, wherein GM does not produce any vehicles, can result in a perilous position not only for GM, but also for the big three U.S. automakers that find themselves in a similar situation. For its part, GM drew down $16 billion in credit while keeping its divided to cope with impacts of the virus.

On the other hand, reports also indicate that the overwhelming majority of analysts still rate GM stock as a “buy,” which is a good sign for prospective investors. Another good indicator is the fact that the possibility of a downgraded credit rating did not seem to have an adverse effect on share values, as GM stock saw an increase in value following the news.

There is some good news, though. A recent analysis shows that GM’s full-size SUVs outsold all rivals combined in 2019. Additionally, new products are on the horizon, including the recently-announced GMC Hummer EV pickup and SUV, GM’s new and proprietary Ultium batteries, which debuted at GM EV Day in early March alongside a new, highly-modular BEV3 platform, which will underpin various upcoming electric models, such as the Cadillac Lyriq electric crossover, Cadillac Celestiq electric sedan, a smaller Cadillac EV crossover and various EVs from the Buick and Chevrolet brands. However, the Coronavirus breakout has led to delays for most of these products.

Mary Barra at the GM EV Day presentation on March 4th.

It’s worth noting that GM share values were experiencing this continued ebb and flow since mid-2018, long before coronavirus complications, though shares have never dipped to the levels seen in March and April.

For the most part, GM stock was in limbo throughout 2019, seeing a jump in value as a result of overwhelmingly positive Q2 2019 earnings, wherein the automaker outperformed expectations. Prior to the COVID-19 pandemic, several factors negatively impacted GM stock price during 2019, including:

• A UAW labor strike that lasted 40 days, resulting in no vehicles being built in the United States during that timeframe. The walkout also disrupted production at some GM plants outside the U.S.
• Warning signs of an economic slowdown
• Escalations with a trade war with China.

Over the last few years, GM has taken many steps to increase the value of its stock, including exiting markets where it can’t find ways to turn a profit (such as Europe, South Africa and India), closing plants in various parts of the world, divesting loss-making divisions (such as Opel-Vauxhall), making adjustments to its business model in order to prioritize profitability over chasing market-share goals, focusing on its Cadillac luxury brand to increase its share of high-profit automobiles, investing heavily into new-age mobility ventures such as electric vehicles and autonomous driving tech, while discontinuing some sedans (Cruze, Volt, Impala, LaCrosse, XTS, CT6) and closing various plants to focus on more profitable crossovers, SUVs and pickup trucks, such as the all-new 2021 Cadillac Escalade that was unveiled on February 4^th.

The 2021 Cadillac Escalade was unveiled on February 4, 2020

Seeking to further streamline its activities in unprofitable markets, General Motors also announced its intention to phase out the Holden brand in Australia and New Zealand, in addition to pulling the Chevrolet brand out of Thailand and selling its Rayong assembly plant to Great Wall Motors.

Despite these actions, the value of GM stock has struggled to surpass the $40 mark, spending most of its time stuck in the $33-$38 per share range (prior to the COVID-19 pandemic). The chain of events is problematic given that the “new GM” had its Initial Public Offering (IPO) at $33 per share in November 2010, causing frustration upon many investors.

The Cruise Origin autonomous ride-sharing vehicle was unveiled in January 21st.

We remain interested in seeing how GM stock performs through the summer of 2020, especially following the COVID-19 crisis. The refresh of many 2021 models will be delayed, including the Cadillac XT4, Chevrolet Traverse, Chevrolet Equinox, GMC Terrain, and Chevrolet Bolt EV.

Meanwhile, the Detroit-based automaker is continuing the launch of its GEM-based vehicles for developing markets and begins to launch its all-new full-size SUVs and various new Cadillac models this year. In addition, the roll-out of its full-size pickup trucks is now complete, which means that – once production restarts – the company will benefit from an entire calendar year of healthy vehicle availability and sales. These factors are expected to contribute significantly to GM’s bottom line.

The automaker is also planning to roll out the Cruise Origin, its autonomous ride-sharing vehicle in 2022, which will be built at the GM Detroit-Hamtramck plant in Michigan. GM sees the robo-taxi service as a significant opportunity for growth.

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