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The electric vehicle (EV) revolution is speeding up with each passing day, thanks to technology innovation, climate concerns and favorable government policies. While the first name that pops into our heads when we think of EVs is Tesla TSLA, it would not be wrong to believe that the legacy U.S. auto giant General Motors GM may soon overtake Tesla if it continues with aggressive and ambitious e-mobility strides.
Indeed, Tesla transformed the EV market much the same way as Amazon AMZN changed the retail landscape and Netflix NFLX revolutionized entertainment. But the EV king might just be slowly losing its first-mover advantage. Consumers now have many options, with various EV models in the market at similar price and range levels. Competition in the EV landscape is heating up, with new models being launched and more and more auto biggies reorienting their business model to keep up with the changing dynamics of the industry. Legacy automakers are pouring vast sums of money to ramp up investment in eco-friendly vehicles. General Motors is one stock that seems to be hitting all the right notes and is expected to make the most of out of the electrified future.
General Motors Hits the Gas on EV Push
General Motors is going the extra mile to put the pedal to the metal toward e-mobility future. A couple of days back, the company boosted electric and driverless investment to $35 billion through 2025, up from $27 billion proposed in November 2020. In the words of the company’s CEO Mary Barra, “We are investing aggressively in a comprehensive and highly-integrated plan to make sure that GM leads in all aspects of the transformation to a more sustainable future”, taking on Musk’s claims to maintain its leadership position when it comes to EV development.
Part of the additional investment would be allocated toward the establishment of two new battery plants. General Motors plans to set up two new battery cell manufacturing plants in the United States by mid-decade, in addition to facilities in Ohio and Tennessee. These factories will not just serve General Motors’ EV requirements but also supply battery cells to Honda and Wabtec. In addition to the collaboration with Honda to co-build two new all electric vehicles (based on the Ultium platform) for the Japan-based giant, General Motors recently partnered with Wabtec for the supply of the Ultium battery technology and Hydrotec hydrogen fuel cell systems for Wabtec freight locomotives.
General Motors targets worldwide EV sales of more than 1 million annually by 2025. Last November, it announced plans to roll out 30 EVs globally by 2025. The vehicles will encompass the company’s entire brand portfolio including Cadillac, Buick, GMC and Chevrolet in varying prices. The firm’s own modular battery platform, Ultium Drive system, will aid in the transition to an all-electric portfolio down the road. Importantly, GMC Hummer all-electric pickup and the Cadillac Lyriq SUV are scheduled to go on sale in late 2021 and first-quarter 2022, respectively. With the latest ramped up investments, the company is set to develop new electric commercial trucks, details of which will be announced later. Also, General Motors intends to add capacity to U.S. assembly factories for electric SUVs.
Basically, its “all-in” electrification strategy to gain a competitive edge in batteries, software, vehicle integration, manufacturing and customer experience will make EVs the key catalyst for boosting the company’s profitability. So, if you want to capitalize on the EV euphoria, General Motors might just be the best stock to place your bets on.
Is EV Prowess the Only Catalyst to Buy the Stock?
General Motors is a legacy automaker with more than 100 years of experience. This trusted company with well-established brands has the scale to make a big splash in the future EV market. In addition to its EV prowess, the firm’s progress in autonomous vehicle (AV) development also augurs well for long-term growth. General Motors’ solid liquidity profile, with automotive liquidity of $37.2 billion as of first quarter 2021-end, is also appreciable.
More importantly, the automaker seems to be successfully navigating the chip crunch, as is evident from the company’s recent plans to ramp up production and deliveries. In fact, General Motors now expects 1H21 results to be significantly better than the previous forecasts. It now expects first-half adjusted earnings before interest and taxes in the band of $8.5-$9.5 billion due to strong demand and ‘production line efficiencies.
Unlike the majority of high-flying EV stocks, General Motors doesn’t seem pricey and is the apt pick for a value investor. Its current enterprise value to earnings before interest, taxes, depreciation, and amortization ratio stands at 8.18, way lower than the industry’s 39.5. On a year-to-date basis, General Motors’ share have surged more than 44% and there is much upside potential left.
The firm displays an impressive earnings surprise history, with the bottom line surpassing estimates in each of the trailing four quarters, the average being 75.8%. The Zacks Consensus Estimate for 2021 and 2022 earnings implies year-over-year growth of 11.6% and 22.8%, respectively. The Zacks Consensus Estimate for 2021 and 2022 sales indicates year-over-year growth 10.6% and 9.5%, respectively. The company has a long-term expected EPS growth rate of 9.8%.
General Motors currently sports a Zacks Rank #1 (Strong Buy) and a VGM Score of A. It is also reasonably priced. So, get your hands on the stock right now for handsome long-term profits. You can see the complete list of today’s Zacks #1 Rank stocks here.
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