General Motors (GM) announced an ambitious growth plan that includes doubling its revenue, and expanding margins, by 2030. I have a bullish outlook on General Motors stock.
General Motors, at its two-day investor event, said that it sees compelling revenue growth opportunities in the coming years as EV scales and growth at new platforms accelerates.
The automaker expects its auto sales and financing revenues to reach $195 billion to $235 billion by 2030. This represents a CAGR (compound annual growth rate) of 4-6%. The outlook also assumes EV sales will grow from $10 billion in 2023 to $90 billion annually by 2030, representing about 40-50% of auto sales.
Furthermore, General Motors expects to generate about $80 billion in annual revenues from software and new businesses, including Cruise, software-enabled services, BrightDrop, Defense, and Insurance.
With improving sales and mix, General Motors expects to deliver 12-14% margins by 2030, reflecting higher EV sales, increased contribution from high-margin software platforms, and a decline in battery costs.
In response to its upbeat outlook, Philippe Houchois of Jefferies stated that its growth projections are well ahead of expectations.
Houchois said, “From On-Star insurance to ADAS subscriptions and connected services, there were lots of discussions of TAMs, none unrealistic, but which were either bullish for the whole industry or assumed that competitors and disruptees would gladly stay behind.”
He further added that the markets could take time “to digest GM growing EBIT 3-4x over 10 years in a competitive industry with many large and well-funded participants pursuing similar EV and software strategies.”
The analyst, however, sees the company’s EV transition plan as “more realistic.” Houchois has a Hold rating on General Motors stock, with a price target of $53 (6.1% downside potential).
Overall, Wall Street is optimistic on GM stock, and its analyst rating consensus of Strong Buy is based on 13 Buys and one Hold.
Furthermore, GM scores a Perfect 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
The average General Motors price target of $71.93 implies 27.5% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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