Shares in the Detroit-based car giant have risen 29% in the past three months and 11% in the last week. Indeed, GM hit not only a 52-week high last Friday, but also the biggest Wall Street upgrade in more than a year. Investors are suddenly a big fan of GM, the world’s second-largest automaker after Ford (F).
One big factor is General Motors (GM), which keeps producing one surprise after another. That’s because GM shares have spent much of the past seven years in the market doldrums, but their resurgence since last fall has accelerated. GM shares have gained ground over the past three years, and they come at a time when Wall Street is slow to recognize the value of its assets.
Wednesday’s first-quarter earnings report provided another positive surprise, as GM beat expectations for the first quarter with earnings per share (EPS) up 5.5% quarter-on-quarter.
The real news, though, is that GM has remained on track to reinvent the company, despite a disruptive chip shortage. He has steadfastly said he will do everything in his power to control the business and prove to Wall Street the value of the company, and he has promised to do everything and everything to create shareholder value.
GM initially raised $20.1 billion, and its shares opened at $35, a 2% increase from the IPO. GM shares have gained in recent months after hitting an all-time high earlier this year. The stock has risen 19.9% to date, driven by the company’s strong performance in the first quarter, its best in more than a year.
However, according to FactSet, the stock has delivered abysmal annualized total returns (including dividend payments), compared with 14% for the S & P 500. A decade later, this new GM has a solid balance sheet, and the company is leaner than it has been for decades.
David Whiston of Morningstar, who has long been a harsh critic of GM, described the company’s stock performance as “volatile and frustrating” over the past decade. IPO, the long-term price-earnings ratio of the stock has barely changed. GM shares are worth about 1.5 times as much as the S & P 500, according to FactSet. In other words, if you invested $10,000 in GM, that would be worth about $15,879 today, compared to $36,742 for the S & P 500.
IPO shares lost momentum, falling 57% from the IPO to an all-time low of $14.33 a share after GM, Ford Motor and Fiat Chrysler announced their first-quarter profits. But several analysts have raised their price targets for GM since then, as the company has significantly exceeded Wall Street expectations since the pandemic and successfully launched its GMC and Hummer electric cars.
UBS analyst Patrick Hummel said earlier this month that GM was back on track and would likely continue to build strong momentum well into 2021.
Investors will view GM as one of the most attractive stocks on the U.S. stock exchange over the next year or two. Optimistic 89% of those who believe they will grow by most or all of them by 2025 believe they will grow at least as fast as the S & P 500 and the Dow Jones Industrial Average.
My models suggest that Ford could earn $1.75 in earnings per share estimates from analysts. Its stock in 2021 includes F’s earnings of $2.25, and my modelling suggested to analysts that it could achieve earnings per share of $2.25 by 2021, an increase of $3.5 billion.
American automaker, I asked 400 investors and dealers about similar shares of American automakers. Will you pay the same for Ford’s stock in 2021 as you would for GM in 2017?
On Thursday, analysts suggested Ford’s net profit would be $13.50, but the 12.30 per cent share price is slightly above GM’s estimate of $13.50 for the same period.
If the problems that have plagued Ford shares in recent years dissipate in 2020 and turn into positive catalysts in 2021, the F-share will appear convincing and trade at $10 in 2020. Tesla shares, for example, have risen 350% over the past five years, the second-highest increase of any publicly traded stock on the US stock exchange, and will rise to $350 by 2021.
Ford Motor Company was founded by Henry Ford and founded on June 16, 1903 in Michigan. Based on the performance of the last 48 years, Ford Motor Co. has risen 14.6% over that period, the second-highest increase of any publicly traded company.
In 1919 Henry Ford bought up investors and refounded the now tried and tested – and – truly risk-free – Free Ford Motor Company. On Wall Street, the company’s first product, the Ford F-150 pickup truck, has become a promising product. There are undoubtedly a lot of execution risks and uncertainties, but GM seems to be working well.
