Would you dare load up on General Motors (NYSE:GM) stock when other traders are selling it? It’s time to consider a long position, as the stock’s recent price moves don’t reflect the actual facts. I am definitely bullish on GM stock, as General Motors’ results and guidance indicate a smooth ride in 2023.
Pick the best stocks and maximize your portfolio:
- Discover top-rated stocks from highly ranked analysts with Analyst Top Stocks!
- Easily identify outperforming stocks and invest smarter with Top Smart Score Stocks
If there’s any company that represents the state of the U.S. economy, it might be automotive giant General Motors. When General Motors’ sales and earnings are healthy, it’s a sign that people have discretionary income to spend on new cars and trucks.
So, General Motors’ first-quarter 2023 financial results have bigger-picture implications, not only for the company but also for the American economy as a whole. There’s a lot to like about General Motors’ quarterly data and forward guidance, yet short-sighted traders are in a selling mood — and that’s fine, as it presents an attractive opportunity, in my view.
General Motors Stock Pops and Drops
The price action of GM stock has been erratic so far today, as the shares gained value before moving 2% to 3% into the red. Consequently, General Motors stock came down to the low $30s, where it has bounced multiple times during the past year. In other words, it looks like GM stock is in a zone where big-money traders tend to scoop up shares at a discount.
Before we get to the positive news about General Motors — and as the data will reveal, there’s a lot to be happy about — we should try to make sense of the market’s negative response to the company’s Q1-2023 earnings report. What could possibly be so objectionable?
Most likely, traders were busy focusing on General Motors’ suggestion that the company’s revenue gains from vehicle-price increases won’t last much longer. In the words of General Motors Chief Financial Officer Paul Jacobson, “As we lap last year’s price increases, we are planning and assuming we give some of that back and are net flat for the year.”
It’s probably true that General Motors will end up cutting some of its vehicle prices, or at least not raising them in the near future. That’s not a bad thing, though, as price reductions could help General Motors compete successfully with electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA).
General Motors’ Beat and Raise is Undeniably Bullish
When it comes to quarterly financial announcements, there’s nothing quite as powerful as the one-two punch of an earnings beat and a guidance raise. Even though GM stock dropped after General Motors released its first-quarter 2023 financial data, it’s evident that the automaker is on the right track.
Here are the need-to-know facts. General Motors reported $39.99 billion in quarterly revenue, up 11.1% year over year and moderately higher than analysts’ consensus estimate of $39.24 billion. Furthermore, General Motors reported $2.21 in quarterly diluted adjusted EPS, up 5.7% year over year and easily topping the analysts’ expectations of $1.72.
The icing on the cake, however, is General Motors’ full-year 2023 earnings guidance. The company knows that it might have to reduce some of its vehicle prices. Yet, even with that in mind, General Motors raised its 2023 forecast for “EBIT-adjusted” from the previous outlook of $10.5 billion – $12.5 billion to a range of $11 billion – $13 billion.
Additionally, General Motors hiked its 2023 guidance for U.S. GAAP net automotive cash provided by operating activities from the prior outlook of $16 billion – $20 billion to a new range of $16.5 billion – $20.5 billion.
Is GM Stock a Buy, According to Analysts?
Turning to Wall Street, GM stock comes in as a Moderate Buy based on six Buys and five Hold ratings. The average General Motors stock price target is $51.27, implying 54.3% upside potential.
The Takeaway
General Motors already had an excellent earnings track record, and this EPS beat will only enhance the automaker’s reputation. At the same time, anxious traders might obsess over the possibility that General Motors could cut some of its vehicle prices.
Yet, General Motors’ guidance doesn’t indicate major financial problems in 2023. Therefore, contrarian investors should strongly consider owning GM stock as it appears to be in the smart-money buy zone, and General Motors’ Street-beating results bode well for this American automotive market icon.
