Stock Analysis & Ideas

What is Sending General Motors (NYSE:GM) Stock Lower Today?

Story Highlights

GM is slipping today after its price target was cut at Morgan Stanley. Its “Hold” rating was untouched, and given the current uncertainty for GM, that may be the best assessment of all.

General Motors (NYSE: GM) has been a leader in the automotive market for decades, now approaching centuries. However, this leader is taking it on the chin in today’s trading session, lagging the broader market so far. A downgrade of sorts at Morgan Stanley (NYSE: MS) was the main catalyst in sending GM shares lower.

Analyst Adam Jonas maintained his “equal weight” rating but dropped the price target from its original $42 to its current $30. The biggest problem, as far as Jonas was concerned, was a loss in the Chinese business for GM.

General Motors has long had the advantage of its name recognition and its worldwide presence. While that has tarnished somewhat in recent years, it’s working on bringing some new advantages into play. This combination of untested battle strategies and a declining picture right now leaves me less than sold on GM.

Thus, I’m neutral on the company right now, which has some great possibilities ahead but no excellent footing on which to base projections.

The last 12 months for GM shares started off fairly volatile, bouncing between $53 and $66 for the final months of 2021 going into January 2022. That kicked off a long, slow slide for GM, as the company bottomed out at just above $30 per share in July. A recovery followed but then largely fizzled out, as the company found new footing around $34, where it is today.

What is the Prediction for GM Stock?

Turning to Wall Street, General Motors has a Moderate Buy consensus rating. That’s based on 10 Buys, four Holds, and one Sell assigned in the past three months. The average GM price target of $51.67 implies 50.8% upside potential. Analyst price targets range from a low of $29 per share to a high of $90 per share.

There’s Reason for Hope in Investor Sentiment Metrics

There is good news to be had when looking at General Motors’ investor sentiment metrics. Right now, GM has a Smart Score of 5 out of 10 on TipRanks. This is slightly under the midpoint of “neutral.” That, in turn, suggests a slightly elevated chance that GM will ultimately lag the broader market.

However, insider trading at GM suggests that a renaissance could be in the making, and there’s a reason for that assessment as well. There has been very little in the way of informative buying and selling lately.

The last Informative Buy came five months ago as director Wesley Bush bought $352,300 worth of stock. However, the aggregate is offering some perspective of its own.

In the last three months, insiders at GM bought stock three times. That’s the entirety of insider trading activity for that entire period. Expanding the outlook to the last 12 months shows more selling activity, but it mostly stopped by February of this year.

Insiders bought stock on 14 occasions this year but sold stock on 21 occasions. However, GM insiders largely stopped selling stock as of January 2022, which was also the briskest month for buying.

Good Ideas, Uncertain Execution

Right now, GM is in something of a state of flux. It’s trying several new points to help improve its market share figures and drive it forward in the market. Still, as these are new points, we don’t have much information yet on what kind of impact these new moves will have.

Let’s start by considering Adam Jonas’ recent appraisal of GM. It’s reasonable enough; he’s clearly favoring the numbers seen at Ford (NYSE: F), and not without reason. However, Jonas’ taste for GM has been sour for quite some time now. On CNBC, he gave an interview noting that it was “unlikely” that anyone would profit off either Ford or GM this year.

Jonas also suggests that phasing out gas engines too fast would have significant social consequences. With GM looking to sell only zero-emission vehicles by 2035, that may ultimately be too fast.

Yet, even that’s not so far out of line; GM sold more electric vehicles in the third quarter than at any point before. Posting new record sales figures likely won’t hurt anyone’s confidence.

Further, GM’s recent move to add former Tesla (NASDAQ: TSLA) executive Jon McNeill to the board of directors can’t hurt. With GM planning to outsell Tesla in the U.S., having some idea of just how Tesla does it may give GM the necessary leg up to succeed on that front.

There are also significant problems in the gas market as a whole. Prices are surging back up once more, a direction that’s no doubt distressing for the Biden Administration.

Trying to convince voters to vote Democrat as gas prices surge once more going into November midterms can’t be easy. With OPEC+ set to cut production by two million barrels per day, that’s only going to make matters worse all around.

Certainly, Jonas’ concerns about sales in China are valid, but GM is also looking to patch that hole with greater sales elsewhere. Recently, word emerged that GM outsold Toyota (NYSE: TM) in the United States in the third quarter. That’s a big step right there.

Yet, it’s unclear just how long such a move can last. Supply is starting to come back up to match demand, and demand is rapidly plunging, thanks to rising interest rates. An equilibrium point is in the cards for the market fairly soon, but it’s almost as likely we’ll blow right through that equilibrium point and head back into a buyer’s market rather than a seller’s market.

In fact, Hyundai Motor (OTC: HYMLF) North America CEO Randy Parker recently summed up the state of the automotive market by talking about Hyundai itself. “We’re cautiously optimistic about moving forward. There’s a lot of negative consumer sentiment in the marketplace. So we’re obviously concerned about that.”

Conclusion: A Cloudy Future for GM

Here’s the problem with GM in a nutshell. Business as usual is fading away thanks to supply-chain issues that made new cars uncommon and used cars downright rare. The new form of business is still amorphous; its possibilities of success and failure are, as a result, unclear.

Randy Parker summed it up well. There’s a lot of negative sentiment; prices are climbing. Consumers are facing rampant inflation virtually everywhere and may therefore choose to stay out of the car market altogether for as long as possible.

There are simply too many unknown figures right now to hazard much guessing about the overall future of the car industry, let alone trying to posit GM’s future. After a few years of selling electric vehicles heavily into whatever market conditions the 2030s generate, maybe something will be clearer.

Thus, for now, I’m staying neutral on GM. There are too many possible outcomes and too many blank spots to weigh in heavily in one direction or the other.


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