General Motors Co. (NYSE: GE) is a global automobile manufacturer and designer that sells cars, trucks, crossovers, and car parts. It also offers software-based services and subscriptions.
The company operates through four segments. In July 2009, GM filed for bankruptcy. It regained its US market share leadership in 2022 after losing it to Toyota due to the 2021 chip shortage.
Past Performance
Since Mary Barra became CEO of GM in 2014, the company’s stock has dropped 25%. Under Barra, the company has invested heavily in an all-electric future, which has received praise from the Biden administration. However, the move has yet to pay off, with the company recently scaling back EV production targets.
In FY 2022, General Motors reported revenues of $156.74 billion, a 23.41% increase compared to the previous year’s revenue of $127 billion. However, earnings were down by $8.92 billion, a drop of 9.37%.
General Motors Earnings Report
General Motors released its earnings report for fiscal Q3 2023 on October 24. The company announced that it was scaling back its full-year earnings guidance of $12-$14 billion to $9.3-$10.7 billion. GM explained that this was due to uncertainty caused by the ongoing union strikes.
Its adjusted EPS for Q3 was $2.28, higher than the analysts’ prediction of $1.84. Revenue was $44.13 billion, higher than the analysts’ estimate of $43.25 billion. It also reported that equity income from Chinese operations was down year-over-year by nearly 42% to $192 million.
In Q3, GM’s reported revenue was up 5.5% from the $41.89 reported in the same quarter last year. Adjusted EPS was down 16.9% from the same quarter in 2022. The North America segment reported adjusted earnings of 9.5% lower than the previous year.
Meanwhile, its international segment reported an increase in earnings of 7%. Meanwhile, the company reported that from January to September 2023, it lost around $1.9 billion on Cruise, a majority-owned autonomous vehicle subsidiary. Those losses include $732 million lost in Q3 as the company expanded its operations.
GM Stock Price Performance
Shortly after the earnings report, GM stock became highly volatile, hitting a 52-week low of $28.01. It has bounced back from that low and is now trading at $29.13 as of 10:11 AM EDT, Thursday, October 26, 2023. However, 2023 has been challenging for GM; the stock is down 13.93% YTD and -23.11% in the past 12 months.
Ongoing UAW Strike
GM is dealing with the ongoing United Auto Workers (UAW) union strike. The union failed to strike a deal with Detroit auto companies by September 14 for contracts involving 146,000 workers. As negotiations continued, UAW extended worker stoppages at Ford Motor, GM, and Stellantis.
After GM released its earnings report, UAW announced it had stopped operations at the highly profitable GM plant in Arlington, Texas. The factory employs nearly 5,000 hourly workers.
GM Abandons Low Cost EV Plans
On Wednesday, October 25, 2023, General Motors announced that it was abandoning its low-cost EV, which it was working on with Honda. The company planned to produce cheap EVs below $30,000 to compete with Tesla.
However, GM is overhauling its entire EV strategy after the recent underperformance of its EV ventures. The decision came after GM failed to meet its EV target of 400,000 units in North America from 2022 to mid-2024, with only 100,000 units produced in North America during H2 2023.
General Motors Stock Forecast
Some investors have described GM stock as a value trap, which refers to a cheap stock that gets cheaper with time. The stock may be underperforming because of the company’s stated vision of becoming an all-electric brand. Consequently, it has struggled to prioritize its most lucrative franchise of internal combustion engines.
Their biggest source of sales is still huge pickups and SUVs, which presents a problem for a company that does not view it as a long-term strategy. Analysts rate GM stock as a moderate buy rating, with an average price target of $47.82, a 64.61% upside based on the current price of $29.13.
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