Momentum is building for auto heavyweight General Motors (GM), with shares rising nearly 25% so far this month. Investors are obviously getting behind a recent slew of positive developments.
Last week, GM revealed its new all-electric GMC Hummer EV pickup truck, which the company boasts is the world’s first all-electric super truck.
GM also disclosed its plans to invest over $2 billion into 6 US facilities, whilst the auto giant has also pledged $2 Billion to turn a former Saturn plant at Spring Hill, Tennessee into a manufacturing site for the Cadillac Lyriq EV, which means it now has 3 separate US plants focusing on electric vehicles.
Furthermore, GM’s self-driving car Cruise recently became the first to be granted a permit from California's Department of Motor Vehicles to test driverless cars in San Francisco.
Even so, investors’ positive reaction to the announcements has caught Deutsche Bank analyst Emmanuel Rosner off guard.
“We have frankly been surprised with the sudden strong positive market reception to these announcements, since GM stock had been chronically underperforming until now, despite providing multiple other such positive technology updates recently,” the analyst said.
In fact, in an odd way, Rosner almost dislikes the newly found positive sentiment, because it could “lower the probability of a full EV spinoff happening.”
Rosner thinks GM’s Spring Hill factory plans “could indeed signal it may not embark upon a full-fledged EV spin-off.”
What’s more, the market’s exuberant reaction to the announcements could also persuade management investors can appreciate its EV segment’s value without resorting to a “carve out.”
Why is Rosner so concerned about seemingly positive developments?
The analyst explained, “We continue to believe the way for GM to unlock the most value from its EV operations is to spin them off into a stand-alone company, generating large valuation upside (a separate EV automaker stock could be worth $20-$100bn), and giving it access to attractive capital and best talent.”
So, there you have it. Rosner currently has a Buy on GM shares along with a $35 price target, which he plans to revisit once GM reports earnings on November 5. At present, the figure implies a 5% downside from current levels. (To watch Rosner’s track record, click here)
Overall, there’s a fair share of bullish sentiment toward GM from the rest of the analyst community. GM's Moderate Buy consensus rating is based on 12 Buys, 3 Holds and 1 Sell. The projection is for 11% of upside over the coming months, given the average price target clocks in at $40.87. (See GM stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.