U.S. Markets closed

GM Keeps Gaining on Driverless Cars and Possible European Merger

Benjamin Rains

Shares of General Motors Company GM, the largest American automaker, are up again after the brief President’s Day market break. On the back of reports that GM is looking to sell its European operations, along with other positive future-looking moves, the automaker could be poised to keep climbing.

GM is up 1.96% to $37.95 per share after early Tuesday afternoon trading. GM is currently a Zacks Rank #2 (BUY) and its shares have been on the rise over the last year.

It has been a week since reports surfaced that GM was discussing the sale of its European operations to French-based PSA Group, the maker of popular European car brands Peugeot and Citroën.

The deal has already experienced some union push back. But German officials have voiced support for the GM and PSA deal as fear of plant closures have been curbed.

GM’s sale of British-based Vauxhall and German-based Opel to PSA could help its shares rise by 35%, according to a Sunday Barron’s report. The deal would make PSA Europe’s second-largest automaker by sales, but it could provide GM nearly $1 billion in cash.

The European sell-off would also allow the U.S. auto manufacturing giant to pour more of its resources into GM’s newest tech-based ventures and markets.

Innovation

GM has invested heavily in new technologies including ride-sharing and electric cars in the last few years. The automaker paid $500 million to purchase a minority stake in the second-largest U.S. ride-sharing company Lyft. It also purchased the autonomous car technology company Cruise Automation for $1 billion in March 2016.

U.S. electric vehicle sales rose 37% in 2016. Despite all of the attention paid to Tesla TSLA, the Chevrolet Volt has continued to do well, with December 2016 sales up 62% year-over-year.

Heavy investment in self-driving vehicle tech has GM set to test autonomous Chevy Bolts in 2017. GM’s focus on autonomous cars puts the company firmly in the race, along with Tesla, Alphabet GOOGL and Uber, to be the first to profit from driverless car tech.

Uber has staked a lot of its future on self-driving cars. Now, with GM’s help, Lyft has moved into the space as well.

Maven, GM’s year-old car-sharing service, is now in 17 U.S. cities. The service allows users to rent GM vehicles on-demand for short amounts of time. But unlike rival Zipcar, there is no membership fee. The service boasts that its 24,000 members have traveled nearly 78 million miles.

Users can rent Chevy, Cadillac and Buick vehicles on their smart phones for an hourly rate of $6 to $8. Lyft drivers can rent a Chevy Equinox for $99 a week under Maven's Express Drive service. And GM is introducing 100 Chevy Bolts (electric cars) to its Los Angeles-area Maven market.

“With more than 25 million customers around the world projected to use some form of shared mobility by 2020, Maven is a key element of our strategy to changing ownership models in the automotive industry,” GM VP of Urban Mobility Programs Julia Steyn said in an initial Maven press release.

Growth and New Markets

GM posted record full-year revenue in 2016 of $166.4 billion, up 9.2% year-over-year. The company sold 3.04 million vehicles in the U.S. It grew sales 10% year-over-year in Decemberbeating out all other U.S. carmakers.

The Detroit-based automaker sold the third most vehicles in the world behind only Volkswagen VLKAY and Toyota TM. GM sold 10 million cars for the first timeever in 2016 despite domestic sales declining for the first time since 2009.

China was GM’s largest market in 2016 as sales rose 7.1%. It sold 3.87 million vehicles, with Cadillac, Buick and Baojun breaking brand records in the market.

Industry-wide seasonal declinescontributed to GM’s slow January 2017.

Zacks' Top 10 Stocks for 2017

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?

Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Tesla Motors, Inc. (TSLA): Free Stock Analysis Report
 
Toyota Motor Corp Ltd Ord (TM): Free Stock Analysis Report
 
Volkswagen AG (VLKAY): Free Stock Analysis Report
 
General Motors Company (GM): Free Stock Analysis Report
 
Alphabet Inc. (GOOGL): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research