It’s get with the program or get left behind in the auto industry. The emergence of the electric vehicle (EV) segment has necessitated a rethink at some of the world’s biggest legacy auto makers. The changing landscape has been duly noted at General Motors (GM), and its efforts to recalibrate are causing Wall Street to look at the auto giant’s value proposition in a different light.
Wedbush’s Daniel Ives believes the pivot toward electric vehicles has given the company “new energy and strategic focus,” but it also places it amongst a different breed of car manufacturers.
“Going forward,” the 5-star analyst said, “GM continues to be a re-rating story as the Street treats the Detroit automaker no longer as a traditional auto company trading based on book value, but a broader disruptive technology play that can start to trade at multiples similar to the likes of Tesla and other pure-play electric vehicle companies as GM executes on its vision.”
The shift in focus cannot be overstated with 2021 acting as an “inflection point.” The company is investing $35 billion for EV R&D purposes and by 2025, GM plans on bringing to market “at least” 30 new EV models. Fast forward a decade from there and the company thinks EVs will account for 100% of sales.
But the EV opportunity is not confined to only the vehicles, there are the products that power this electric future. Under the Ultium Platform, GM is also developing “game-changing” battery technology.
“By leveraging this technology,” Ives said, “The legacy auto maker will be able to eat up market share against pure-play EVs in all aspects of the industry.” And a huge market it is, one Ives estimates will be worth $5 trillion over the next decade.
The opportunity also extends to the software and services required for autonomous/assisted driving, which Ives says is a “potential gold mine.” Over the next 5 to 7 years, this segment could generate between $20 billion to $30 billion.
In fact, with the software and services business and battery tech segment complementing each other, Ives thinks GM stock could be on the road to doubling its market cap “in a SOTP valuation by the end of 2022.”
For now, Ives rates GM an Outperform (i.e. Buy) along with an $85 price target. This figure indicates upside of 45% from current levels. (To watch Ives’ track record, click here)
Looking at the consensus breakdown, one lone analyst thinks GM is a Hold, but all 15 other recent reviews recommend to Buy, together coalescing to a Strong Buy consensus rating. At $73.73, the average price target suggests shares will gain 25% on the 12-month time frame. (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.