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GM, LG Energy Mull Second Battery Cell Plant In US; Street Is Bullish

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support@smarteranalyst.com (Ben Mahaney)
·2 min read
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General Motors confirmed on Thursday that the vehicle maker is weighing building a second battery cell manufacturing plant in the US with joint venture partner LG Energy Solutions. Shares declined 1.9% in Thursday’s after-market trading.

GM (GM) said that via the Ultium Cells LLC joint venture with LG Energy, the car marker is “exploring the feasibility of constructing a second state-of-the-art battery cell plant.” A decision should be made by the first half of 2021, the US vehicle maker said.

The move, which was first reported by the Wall Street Journal, is part of the Detroit car maker’s strategy to expand its investment in electric vehicles. GM and LG are on the cusp of taking a decision to locate the plant in Tennessee, the WSJ reported. A final selection though hasn’t yet been made.

The two companies are building a $2.3 billion battery plant in northeast Ohio expected to open its doors next year to supply enough batteries to power hundreds of thousands of vehicles annually. The new plant is likely to be a similar-size investment, the WSJ said.

GM shares have ballooned 76% over the past six months, as the automaker presented investors with a strategic update on its electric vehicle (EV) vision, which includes more than $20 billion investment over the next 5 years.

Morgan Stanley analyst Adam Jonas last month maintained a Buy rating on the stock with a $80 price target (54% upside potential) following recent talks with investors, which point to a rising interest in what he calls "the individual 'hidden gems' within" GM’s technology and services portfolio, including scalable technologies in electric, connected and autonomous vehicle end markets.

Jonas listed Cadillac, Corvette, OnStar, China JVs, GM Hydrotec, GM Financial, Ultium EV batteries and Cruise robotaxis among the businesses, which he named the arms of the "GM SPACtopus." (See GM stock analysis on TipRanks).

Overall, Wall Street analysts share Jonas’ bullish outlook on the stock. The Strong Buy consensus rating shows 11 Buys versus 1 Hold. With shares up 25% so far this year, the average analyst price target of $63.67 suggests additional 23% upside potential lies ahead over the coming year.

On TipRanks' Smart Score system ranking, GM gets a 7 out of 10, which implies that the stock is likely to perform in line with market averages.

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