General Motors Plunges 5.4% Despite Exceeding Q3 Expectations

Shares of global carmaker General Motors Co. (GM) plunged 5.4% on Wednesday despite reporting better-than-expected third-quarter results. The strong performance was attributed to favorable pricing and strong mix performance in North America. Further, the company also recovered recall-related costs from their battery supplier and JV partner LG Electronics. Shares closed at $54.26 on October 27.

GM reported adjusted earnings of $1.52 per share, down 46.3% year-over-year, but much better than analyst estimates of $0.96 per share.

Additionally, revenue came in at $26.78 billion, declining 24.5% compared to the year-ago period, but also surpassed Street estimates of $26.51 billion. (See Insiders’ Hot Stocks on TipRanks)

During the quarter, GM sold a total of 1,311,000 vehicles worldwide, 26.8% fewer than the same quarter last year. The ongoing semiconductor shortage and labor problems, as well as multiple electric vehicle recalls due to fire and other issues, hampered GM’s ability to manufacture and sell more vehicles.

Commenting on the results, Mary Barra, Chairman, and CEO of GM said, “Our third-quarter 2021 results clearly illustrate the strength of the underlying business that is funding our future, especially when you put them in the context of the calendar year… Together, we are developing new technologies, incubating new businesses, delivering great products and services for our customers, and generating strong results that we can reinvest in our future.”

Based on the current economic environment and business momentum, GM guided for full-year Fiscal 2021 adjusted earnings to fall in the range of $5.70 – 6.70 per share versus the consensus estimate of $6.25 per share.

Impressed with GM’s solid Q3 beat, Wedbush analyst Daniel Ives reiterated a Buy rating on the stock with a price target of $85, implying 56.7% upside potential to current levels.  

The analyst noted that the semiconductor shortage will moderate in 2022 and will benefit GM and the entire auto industry. He is encouraged by the quarterly results and full-year guidance and is optimistic about GM’s electrified vehicle plans going forward.

Ives said, “We believe as GM proves out its EV vision over the coming years the stock will be re-rated more as a disruptive technology and EV play, rather than its traditional auto valuation. We believe GM on both a sum of the parts (SOTP) and incremental EV/services opportunity will result in a much higher multiple over time.”

Overall, the stock commands a Strong Buy consensus rating based on 14 Buys and 1 Hold. The average General Motors price target of $73.20 implies 34.9% upside potential to current levels. Shares have gained 59.2% over the past year.

Moreover, TipRanks data shows that financial blogger opinions are 96% Bullish on GM, compared to a sector average of 72%.

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