Is this increasingly electric car giant a buy or a sell?

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Key points to remember

  • GM was able to beat third-quarter earnings estimates.
  • GM continues to focus on electric vehicles and energy storage as the company seeks to compete directly with Tesla.
  • GM reported net income of $3.3 billion for the quarter and forecast annual revenue of between $9.6 billion and $11.2 billion, which would be surprisingly positive news in a climate of widespread economic uncertainty.

General Motors recently released its third quarter financial results and analysts were surprised that the company beat earnings estimates. Investors were pleased to see that the Detroit-based automaker was able to report strong vehicle sales, even when many of us were concerned about the economic slowdown due to soaring inflation and rising prices. rates threatening to tip us into a recession.

GM’s optimism contrasted with Ford’s warnings a month ago that inflation was impacting supplier costs. We’ll take a look at GM’s earnings to see if this auto giant stock is a buy or sell right now…

GM earnings results

General Motors announced its results for the third quarter of 2022 on October 25. Here are some of the highlights from GM’s recent earnings report:

  • Revenue was $41.89 billion, compared to $26.78 billion in the same quarter last year.
  • Net income for the quarter was $3.3 billion, up from $2.4 billion year over year.
  • Earnings per share (EPS) was $2.25, down from $1.62 per share a year ago.
  • The company still expects annual net profit of between $9.6 billion and $11.2 billion.
  • The increase in revenue is mainly due to a 24% increase in sales in the United States as supply chain issues begin to stabilize.
  • GM expanded its market share to the point that 7.7% of all cars, trucks and crossovers sold worldwide were made by GM.
  • Due to record sales, GM has decided to increase production of the Chevrolet Bolt EV and Bolt EUV to 70,000 units in 2023.
  • GM plans to increase sales of electric vehicles. The goal is to build a total of 400,000 electric vehicles in North America by early 2024.

CEO Mary Barra explained on the earnings call that the current operating environment is challenging and the company is seeing gradual improvement in supply chains. GM’s positive outlook contrasts with warnings Ford issued in mid-September when they acknowledged supply chain challenges driving additional costs.

What’s next for GM stocks?

Before making the decision to invest in GM, it is important that you consider all relevant factors relating to both GM and the automotive industry as a whole.

The expansion of electric vehicle sales.

GM is in direct competition with Tesla when expanding electric vehicle sales. GM’s market share in the United States for electric vehicles rose to more than 8% in the third quarter, from 4% previously. As governments continue to pour money into greener sources of energy, it will be worth paying more attention to this sector.

GM plans to increase production of its Chevrolet Bolt EV and Bolt EUV to 70,000 vehicles next year from 44,000 this year. GM will make further announcements regarding the scaling of its electric vehicles on Investor Day on Nov. 17. The company will also introduce three new electric vehicles in 2023: the first all-electric Silverado pickup truck, the Chevrolet Blazer EV and the Chevrolet Equinox EV crossover models. .

GM has publicly stated that its intention is to stop selling gas-powered vehicles altogether by 2035, so we’ll have to watch closely to see what happens with the adoption of electric vehicles in society.

The transition to renewable energies

As the world moves towards renewable energy sources, we’ll see how it affects GM and how quickly they respond to the opportunity. The company recently announced that all of its facilities will be powered by renewable energy sources by 2025. As businesses and governments around the world focus on implementing greener energy sources, this space cannot be ignored.

GM’s Energy division will soon be launched

GM announced on October 11 that it would launch a new division known as GM Energy. This division will focus on offering “coherent energy management” services for commercial and residential consumers. Connected product and service offerings include stationary storage batteries, solar panels and hydrogen fuel cells. GM will also offer the current Ultium Charge 360 ​​public charging service with two additions, Ultium Home and Ultium Commercial, designed to help users manage their power and increase their energy autonomy.

As we have seen in the past, Tesla currently generates substantial revenue from the energy storage industry. So getting into the power management business shows that GM is ready to compete with Tesla.

Troubleshoot supply chain issues

We cannot ignore the supply chain issues that have plagued many industries this year as the war between Russia and Ukraine drags on. The auto industry is not exempt from these supply chain problems, as Ford announced that it had to restructure its logistics after spending an additional billion dollars in parts and raw material costs. GM said in its earnings report that it continues to negotiate supply deals and raw material investments to drive the growth of electric vehicles.

Current economic situation

While the company may have exceeded earnings expectations, we cannot ignore the reality of what is happening in the economy right now. As the Fed continues the most aggressive rate hike campaign in decades to combat soaring inflation, the economy is fraught with uncertainty. Many analysts are worried about what will happen to consumer spending if rate hikes drag us into a full-blown recession. The current macroeconomic situation is something that needs to be watched closely in every industry.

Should you buy or sell GM shares?

Many analysts viewed GM stock as a buy after the recent earnings report. Considering the stock is down more than 35% for the year, it’s fair to say that hasn’t always been the case. However, the company seems to be turning things around despite the current economic climate. Many stocks have fallen in 2022 due to market sell-offs caused by soaring inflation and persistent rate hikes.

GM stock closed yesterday, Nov. 7, at $39.39, and the stock currently has a one-year target price of $48.44. This blue-chip stock might be worth adding to your portfolio if you’re looking to add some exposure to the automotive industry.

Here are the top reasons why GM stock could be a buy right now…

New sources of income

We can’t ignore the importance of adding new revenue streams as inflation soars and automakers grapple with rising raw material costs.

A new service for GM is Ultifi, a software platform to enhance the vehicle experience and meet the digital demands of consumers. Ultifi will launch new products from 2023, with experts predicting that sales will reach $25 billion by 2030. This goes hand-in-hand with the other revenue streams we mentioned earlier as GM looks to get into energy storage.

Massive growth

You rarely hear of massive companies like GM doubling their revenue because we often associate this type of growth with smaller, less established companies. The company plans to double its revenue to between $275 billion and $315 billion by 2030 through various new revenue streams and growth in vehicle sales.

While it’s hard to make decisions based on expectations, it’s worth considering a company’s future plans when deciding how to invest your money. We will also have to see how the massive adaptation of electric vehicles plays out.

How should you invest?

Will vehicle sales stabilize? As the world continues to normalize, auto sales are also increasing. This may make it tempting to invest in the automotive industry, but we cannot ignore the potential for a possible recession and its impact on this industry. Although people still need to move during a recession, chances are people will be less inclined to buy a new vehicle.

With a greater emphasis on electric vehicles, GM is trying to capitalize on the push toward greener energy sources. You can start investing in a greener future now with Q.ai’s Clean Tech Kit. This kit simplifies investing in the electric vehicle industry because you won’t have to predict which company will perform best in this area. You will invest in an industry you believe in without the need to constantly follow prices and news as stock prices fluctuate.

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