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General Motors (GM - Free Report) is a Zacks Rank #5 (Strong Sell) that one of the largest automakers in the world and makes up 17% of the U.S market share. The company designs, builds and sell trucks, cars, crossovers and automobile parts worldwide.
The stock has had a nice run as of late after taking off in January. The company has transitioned well in EV, it continues to dominate traditional markets. However, the stock looks like it might have topped and analysts are lowering estimates.
As we approach the upcoming earnings season, investors should be tapping the breaks and possibly taking some profits.
More about GM
General Motors is and iconic American car company with a long history that goes back to 1908. Part of the “Big Three”, General Motors is headquartered in Detroit, Michigan and employs over 150,000.
The company is valued around $86 billion and has a PE of 12. GM has Zacks Style Scores of “A” in Value and “B” both Growth and Momentum. The company pays no dividend.
Since the company went bankrupt in 2009 and IPOs in 2010, General Motors has been profitable. Even so, the stock traded between $30 and $40 for the last decade. It was only recently that the stock broke out, but are investors getting ahead of themselves?
Q4 Earnings
Earnings have been pretty impressive over the last couple years, with the company beating ten quarters in a row. The company reported Q4 in early February, seeing a 19% EPS beat. The company also beat on revenue seeing $37.5B v the $36.9B expected.
The bad news was that the company guided FY21 at $4.50-5.25 v the $5.92 expected. The reasoning behind the drop in guidance was the semiconductor shortage that the company was starting to experience. This has only gotten worse since the company guided.
Semiconductor Shortage
At the time, GM expected the semi shortage to be temporary and thought that it would not impact the growth and EV initiatives. However, the headlines about semiconductor shortages keep coming.
Earlier this month GM has announced cuts in production at several North American facilities due to the shortage. While some chip supply has been improved this week, the question is if the damage was done for the quarter and the year.
Estimates
The guidance and risk of more shortages has estimates falling for FY21 and next FY22. For the current year, analyst have lowered estimates from $5.49 to $5.09, or 7%, over the last two months. For next year, analysts have dropped their numbers 5.5% over that same timeframe.
The Technicals
During the COVID crash, the stock dropped to $14, but rallied back to pre-COVID levels by October. At the beginning of 2021, the stock took off, making a 20% move higher to the $50 level. Since then, the stock has grinded higher, recently topping out over $63.
GM recently broke the 21-day moving average and the bulls have to take caution if that momentum level fails. The next stop lower and test of support would be the $56 level, right above the 50-day MA. The 200-day is all the way down under $41, so unless there is a broad market sell off, that test isn’t likely.
In Summary
General Motors is a great American car company that we all root for. However, investors should be aware there are some flashing red lights as we approach the upcoming earnings season.
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The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
Bear of the Day: General Motors (GM)
General Motors (GM - Free Report) is a Zacks Rank #5 (Strong Sell) that one of the largest automakers in the world and makes up 17% of the U.S market share. The company designs, builds and sell trucks, cars, crossovers and automobile parts worldwide.
The stock has had a nice run as of late after taking off in January. The company has transitioned well in EV, it continues to dominate traditional markets. However, the stock looks like it might have topped and analysts are lowering estimates.
As we approach the upcoming earnings season, investors should be tapping the breaks and possibly taking some profits.
More about GM
General Motors is and iconic American car company with a long history that goes back to 1908. Part of the “Big Three”, General Motors is headquartered in Detroit, Michigan and employs over 150,000.
The company is valued around $86 billion and has a PE of 12. GM has Zacks Style Scores of “A” in Value and “B” both Growth and Momentum. The company pays no dividend.
Since the company went bankrupt in 2009 and IPOs in 2010, General Motors has been profitable. Even so, the stock traded between $30 and $40 for the last decade. It was only recently that the stock broke out, but are investors getting ahead of themselves?
Q4 Earnings
Earnings have been pretty impressive over the last couple years, with the company beating ten quarters in a row. The company reported Q4 in early February, seeing a 19% EPS beat. The company also beat on revenue seeing $37.5B v the $36.9B expected.
The bad news was that the company guided FY21 at $4.50-5.25 v the $5.92 expected. The reasoning behind the drop in guidance was the semiconductor shortage that the company was starting to experience. This has only gotten worse since the company guided.
Semiconductor Shortage
At the time, GM expected the semi shortage to be temporary and thought that it would not impact the growth and EV initiatives. However, the headlines about semiconductor shortages keep coming.
Earlier this month GM has announced cuts in production at several North American facilities due to the shortage. While some chip supply has been improved this week, the question is if the damage was done for the quarter and the year.
Estimates
The guidance and risk of more shortages has estimates falling for FY21 and next FY22. For the current year, analyst have lowered estimates from $5.49 to $5.09, or 7%, over the last two months. For next year, analysts have dropped their numbers 5.5% over that same timeframe.
The Technicals
During the COVID crash, the stock dropped to $14, but rallied back to pre-COVID levels by October. At the beginning of 2021, the stock took off, making a 20% move higher to the $50 level. Since then, the stock has grinded higher, recently topping out over $63.
GM recently broke the 21-day moving average and the bulls have to take caution if that momentum level fails. The next stop lower and test of support would be the $56 level, right above the 50-day MA. The 200-day is all the way down under $41, so unless there is a broad market sell off, that test isn’t likely.
In Summary
General Motors is a great American car company that we all root for. However, investors should be aware there are some flashing red lights as we approach the upcoming earnings season.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>