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The Zacks Analyst Blog Highlights: General Motors, Tesla, Ford, Toyota and Volkswagen
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For Immediate Release
Chicago, IL – October 11, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: General Motors Company (GM - Free Report) , Tesla, Inc. (TSLA - Free Report) , Ford Motor Company (F - Free Report) , Toyota Motor Corporation (TM - Free Report) and Volkswagen AG (VWAGY - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Is GM a 'Buy' After Setting Ambitious Growth Targets?
General Motors’ two-day investor event, which began on Oct 6, seems to have managed to woo investors. Shares of the U.S. auto giant rose 4.7% to close the session at $56.44 yesterday, as the firm laid out a detailed roadmap to become the frontrunner in the auto industry, both in terms of technology development and profitability.
CEO Mary Barra made a bold claim indicating that General Motors is on track to become the U.S. market share leader in the electric vehicle (EV) space. Despite all the buzz, the company still currently carries a Zacks Rank #4 (Sell). Why is that so? Does the growth target seem a bit far-fetched? Or is it just the right time to take profits in the stock as
General Motors may decline (on temporary headwinds like a global chip crunch and rising costs) before it sees an upside again? Before delving into all that, here’s what the company stated about future growth plans during the much-awaited Investor Day event.
General Motors believes that its compelling hardware and software platforms, electrification strides as well as aggressive autonomous vehicle (AV) development will result in major revenue growth by the end of the decade. The auto giant aims to double its five-year average annual revenues of $140 billion by 2030, with software and new businesses witnessing a CAGR of 50% through the decade-end. To that end, the company expects $80 billion in new revenues from software-enabled services, Cruise unit, BrightDrop business and OnStar insurance line.
Revenues from the software and services platform are expected in the range of $20-$25 billion per year from an estimated 30 million connected vehicles. Part of the software and services revenue growth will stem from its OnStar subscription business, which is projected to generate annual sales of $6 billion by 2030. Last month, General Motors unveiled the Ultifi platform, a new end-to-end software platform in vehicles starting from 2023, built to unleash new vehicle experiences and seamlessly integrate customers’ digital lives.
Its BrightDrop unit has the potential of generating $5 billion revenues by mid-decade and $10 billion by 2030-end. With the roll-out of the BrightDrop delivery business, General Motors is able to capitalize on the surging demand for urban last-mile delivery, while reducing carbon impact on the planet.
Furthermore, the automaker has provided a one-stop-shop solution for commercial customers, enabling them to deliver goods in an efficient and more sustainable manner. This new business unit has unlocked fresh opportunities in the B2B sector for the company. BrightDrop recently completed the first production builds of the EV600 van and has planned to add a second van, the EV410, to its vehicle line-up in 2023.
General Motors’ AV unit — Cruise — anticipates generating $50 billion in revenues as it scales up operations over the next couple of years. Last month, Cruise received a driverless deployment permit in California, becoming the first autonomous ride-hail company to secure the same.
The company plans to charge for rides as early as next year, with a modified version of the Chevrolet Bolt electric car. Meanwhile, taking its AV game a notch higher, General Motors recently unveiled Ultra Cruise — an all-new technology enabling true hands-free driving in 95% of scenarios that will be available in a handful of high-end vehicles starting 2023.
Meanwhile, General Motors projects annual EV revenues to scale from $10 billion in 2023 to $90 billion by the decade-end. As stated earlier this year, the automaker plans to roll out 30 fresh EV models by 2025-end and transition to an all-electric fleet by 2035.
The firm’s own modular battery platform, the Ultium Drive system, will aid in the transition to an all-electric portfolio down the road. The array of Ultium-powered EVs will include popular models, including a $30,000 Chevrolet crossover, Buick crossovers, Chevrolet trucks, GMC Hummer EV and Cadillac Lyriq crossover EV.
The company will also offer an electric version of GMC’s Sierra pickup truck. General Motors plans to set up two new battery cell manufacturing plants in the United States by mid-decade, in addition to the facilities in Ohio and Tennessee. It recently set the stage for battery tech innovation with the announcement of establishing a new research facility in Michigan — Wallace Battery Innovation Center.
Will GM be Able to Overtake the EV King?
The fact that General Motors is eying to take the leadership position in the U.S. EV market share basically implies that the company believes that it can overtake Tesla’s crown in the coming years. With a market cap of around $78 billion, General Motors is currently far behind Tesla, which boasts a market value of $775 billion.
Though General Motors is only second to Tesla in terms of U.S. EV sales, the latter leads by a huge margin. While the legacy auto giant claims to have transformed from an automaker to a platform innovator and is indeed putting out all the stops to stay ahead of much of the competition in electrification, software technology and driverless capabilities, will it be able to surpass Tesla’s EV prowess?
General Motors also stated that 50% of its plants in North America and China will be capable of EV production by 2030 and become all-electric only by 2035. While the target in itself seems good enough, but since the company plans to beat Tesla’s market share, would that be sufficient?
Well, it’s still too early to say if it would manage to overtake Tesla in the EV space. Jefferies analyst Philippe Houchois is of the opinion that “it may take time for markets to digest how realistic GM's roadmap is.” This indicates that its expectations might be too lofty.
Temporary Hurdles in Path
While General Motors manages to tick all the boxes to make the most out of the electrified and autonomous future while successfully attempting to transform itself into a technology play, its near-term prospects don’t seem too bright.
Currently, General Motors ——which shares space with other auto biggies like Ford, Toyota and Volkswagen among others— is battling the global shortage of semiconductor supply. The company had already warned during the second-quarter earnings call that it expects challenges in the second half of 2021 due to plant downtime.
Importantly, General Motors’ third-quarter sales took a nasty hit amid supply constraints and historically low inventories. Sales plummeted 33% year over year to 446,997 vehicles. Per U.S. Automotive News, this marks the company's lowest three-month tally since its 2009 bankruptcy.
While General Motors’ big spending of $35 billion through 2025 for EV and AV development will prove beneficial in the long term, it is likely to strain the company’s near-term financials. As it is, the firm’s total debt to capitalization stands at 65%. Its long-term automotive debt at quarter-end increased to $16.4 billion from $16.2 billion as of Dec 31, 2020. It envisions 2021 adjusted automotive free cash flow in the band of $1-$2 billion, indicating a decline from $2.6 billion recorded in 2020.
Capex for 2021 is anticipated between $9 billion and $10 billion, including $2 billion of deferred capex from 2020 as well as ramped-up EV spending. The forecast implies a significant uptick from the 2020 capex of $5.2 billion.
This will hurt the company’s cash flows, especially at a time when sales are under pressure amid chip deficit. It should also be noted here that General Motors anticipates operating margins of 12-14% by 2030, implying just a modest improvement from 12.8% recorded in the first half of 2021.
Last Word
Indeed, General Motors might be hitting the right notes, but it’s a stock with quite a few short-term headwinds. So, it might not be the right time to hit the buy button on the stock. Instead, you can cash in on the share price gains currently, and buy it at an opportune time when the price dips.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: General Motors, Tesla, Ford, Toyota and Volkswagen
For Immediate Release
Chicago, IL – October 11, 2021 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: General Motors Company (GM - Free Report) , Tesla, Inc. (TSLA - Free Report) , Ford Motor Company (F - Free Report) , Toyota Motor Corporation (TM - Free Report) and Volkswagen AG (VWAGY - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Is GM a 'Buy' After Setting Ambitious Growth Targets?
General Motors’ two-day investor event, which began on Oct 6, seems to have managed to woo investors. Shares of the U.S. auto giant rose 4.7% to close the session at $56.44 yesterday, as the firm laid out a detailed roadmap to become the frontrunner in the auto industry, both in terms of technology development and profitability.
CEO Mary Barra made a bold claim indicating that General Motors is on track to become the U.S. market share leader in the electric vehicle (EV) space. Despite all the buzz, the company still currently carries a Zacks Rank #4 (Sell). Why is that so? Does the growth target seem a bit far-fetched? Or is it just the right time to take profits in the stock as
General Motors may decline (on temporary headwinds like a global chip crunch and rising costs) before it sees an upside again? Before delving into all that, here’s what the company stated about future growth plans during the much-awaited Investor Day event.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Golden Nuggets from the Event
General Motors believes that its compelling hardware and software platforms, electrification strides as well as aggressive autonomous vehicle (AV) development will result in major revenue growth by the end of the decade. The auto giant aims to double its five-year average annual revenues of $140 billion by 2030, with software and new businesses witnessing a CAGR of 50% through the decade-end. To that end, the company expects $80 billion in new revenues from software-enabled services, Cruise unit, BrightDrop business and OnStar insurance line.
Revenues from the software and services platform are expected in the range of $20-$25 billion per year from an estimated 30 million connected vehicles. Part of the software and services revenue growth will stem from its OnStar subscription business, which is projected to generate annual sales of $6 billion by 2030. Last month, General Motors unveiled the Ultifi platform, a new end-to-end software platform in vehicles starting from 2023, built to unleash new vehicle experiences and seamlessly integrate customers’ digital lives.
Its BrightDrop unit has the potential of generating $5 billion revenues by mid-decade and $10 billion by 2030-end. With the roll-out of the BrightDrop delivery business, General Motors is able to capitalize on the surging demand for urban last-mile delivery, while reducing carbon impact on the planet.
Furthermore, the automaker has provided a one-stop-shop solution for commercial customers, enabling them to deliver goods in an efficient and more sustainable manner. This new business unit has unlocked fresh opportunities in the B2B sector for the company. BrightDrop recently completed the first production builds of the EV600 van and has planned to add a second van, the EV410, to its vehicle line-up in 2023.
General Motors’ AV unit — Cruise — anticipates generating $50 billion in revenues as it scales up operations over the next couple of years. Last month, Cruise received a driverless deployment permit in California, becoming the first autonomous ride-hail company to secure the same.
The company plans to charge for rides as early as next year, with a modified version of the Chevrolet Bolt electric car. Meanwhile, taking its AV game a notch higher, General Motors recently unveiled Ultra Cruise — an all-new technology enabling true hands-free driving in 95% of scenarios that will be available in a handful of high-end vehicles starting 2023.
Meanwhile, General Motors projects annual EV revenues to scale from $10 billion in 2023 to $90 billion by the decade-end. As stated earlier this year, the automaker plans to roll out 30 fresh EV models by 2025-end and transition to an all-electric fleet by 2035.
The firm’s own modular battery platform, the Ultium Drive system, will aid in the transition to an all-electric portfolio down the road. The array of Ultium-powered EVs will include popular models, including a $30,000 Chevrolet crossover, Buick crossovers, Chevrolet trucks, GMC Hummer EV and Cadillac Lyriq crossover EV.
The company will also offer an electric version of GMC’s Sierra pickup truck. General Motors plans to set up two new battery cell manufacturing plants in the United States by mid-decade, in addition to the facilities in Ohio and Tennessee. It recently set the stage for battery tech innovation with the announcement of establishing a new research facility in Michigan — Wallace Battery Innovation Center.
Will GM be Able to Overtake the EV King?
The fact that General Motors is eying to take the leadership position in the U.S. EV market share basically implies that the company believes that it can overtake Tesla’s crown in the coming years. With a market cap of around $78 billion, General Motors is currently far behind Tesla, which boasts a market value of $775 billion.
Though General Motors is only second to Tesla in terms of U.S. EV sales, the latter leads by a huge margin. While the legacy auto giant claims to have transformed from an automaker to a platform innovator and is indeed putting out all the stops to stay ahead of much of the competition in electrification, software technology and driverless capabilities, will it be able to surpass Tesla’s EV prowess?
General Motors also stated that 50% of its plants in North America and China will be capable of EV production by 2030 and become all-electric only by 2035. While the target in itself seems good enough, but since the company plans to beat Tesla’s market share, would that be sufficient?
Well, it’s still too early to say if it would manage to overtake Tesla in the EV space. Jefferies analyst Philippe Houchois is of the opinion that “it may take time for markets to digest how realistic GM's roadmap is.” This indicates that its expectations might be too lofty.
Temporary Hurdles in Path
While General Motors manages to tick all the boxes to make the most out of the electrified and autonomous future while successfully attempting to transform itself into a technology play, its near-term prospects don’t seem too bright.
Currently, General Motors ——which shares space with other auto biggies like Ford, Toyota and Volkswagen among others— is battling the global shortage of semiconductor supply. The company had already warned during the second-quarter earnings call that it expects challenges in the second half of 2021 due to plant downtime.
Importantly, General Motors’ third-quarter sales took a nasty hit amid supply constraints and historically low inventories. Sales plummeted 33% year over year to 446,997 vehicles. Per U.S. Automotive News, this marks the company's lowest three-month tally since its 2009 bankruptcy.
While General Motors’ big spending of $35 billion through 2025 for EV and AV development will prove beneficial in the long term, it is likely to strain the company’s near-term financials. As it is, the firm’s total debt to capitalization stands at 65%. Its long-term automotive debt at quarter-end increased to $16.4 billion from $16.2 billion as of Dec 31, 2020. It envisions 2021 adjusted automotive free cash flow in the band of $1-$2 billion, indicating a decline from $2.6 billion recorded in 2020.
Capex for 2021 is anticipated between $9 billion and $10 billion, including $2 billion of deferred capex from 2020 as well as ramped-up EV spending. The forecast implies a significant uptick from the 2020 capex of $5.2 billion.
This will hurt the company’s cash flows, especially at a time when sales are under pressure amid chip deficit. It should also be noted here that General Motors anticipates operating margins of 12-14% by 2030, implying just a modest improvement from 12.8% recorded in the first half of 2021.
Last Word
Indeed, General Motors might be hitting the right notes, but it’s a stock with quite a few short-term headwinds. So, it might not be the right time to hit the buy button on the stock. Instead, you can cash in on the share price gains currently, and buy it at an opportune time when the price dips.
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Zacks Investment Research
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support@zacks.com
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.