General motors company (NYSE Ticker:GM) has not been on the receiving end of good news when it comes to escalating trade tensions between the US and China. In the beginning of the game, one of the first questions that was steel. Some analysts say that higher costs for steel could hit the bottom line of GM as much as $ 1 billion. It is not surprising that the shares “Dzheneral motors” has not responded to these tests.
Other input prices and tariffs can negatively affect General motors, Ford motor company (Ticker NYSE:F), Toyota Motor Corp. (ADR) (NYSE Ticker:TM), Honda motor co Ltd (ADR) (Ticker NYSE:HMC) and others. Although Recent comments from China’s XI offers automakers may be on the receiving end of some good news — another reason to consider GM composition.
Infrastructure development for GM stock
Famous auto analyst Adam Jonas of Morgan Stanley upgraded GM’s stock to beat with equal weight. He did this based on the fact that the automaker will have positive changes in earnings “as investors better understand the impact on the us pickup truck sales from the potential adoption of the draft law infrastructure in the United States.”
Jonas also believes that Ford and Fiat Chrysler automobiles NV (NYSE Ticker symbol:German) would be an advantage as well. At the expense of infrastructure, which could climb as high as a 10-year period at $2.4 trillion, will stimulate an increase in sales of highly profitable pickup truck.
It can reasonably be argued that Ford is the big winner, given that the F-Series was the bestselling car in the U.S. for several decades. It should be noted that Jonas rating to buy shares of Ford on March 21 and target price of 15$, which is the highest estimate on wall Street.
Jonas killed their target price on shares “Dzheneral motors” to $48 from $45, while high on wall Street sits $70 designated by Citigroup in mid-February. While this would require meeting the 85% of GM’s stock price, that would mean stock trading for you in this — only 11 times earnings in 2018.
Evaluation Of GM Shares
Currently, the shares pay a 4% per annum, but for some, the dividends are not of the essence. Perhaps they would care that GM stock trading at less than 6 times 2018 earnings. However, the assessment comes with its own caveat as well: the growth is nil.
The consensus expectations call for a 90 basis points decline in revenues in the current year, with negligible sales of 0.5% growth next year. Earnings per share is projected to slip this year to about 4%, After zero growth next year.
This is one of the lowest ratings in the S&P 500 and, such as Micron technology, Inc. (NASDAQ:MU). But unlike GM, shares of MU have a lot of growth in the future.
This is the only thing that makes the shares GM is such a tricky investment. The economy is not showing any cracks, so the recession is not a big problem. 6 times earnings is cheaper than the cheapest, but when there is no growth in sight for almost two years (as a minimum), investors are feeling little reason to gobble up shares.
One catalyst? Self-driving cars. Many analysts do not see 2019, in real terms, but the management said that it is possible. In a nutshell, GM wants to deploy a fleet of fully Autonomous taxi in dense urban areas. And not a one-time sale (the average transaction price in the upper range$30,000), GM says that cleaning can bring hundreds of thousands of dollars in revenue per unit.
If this is true — and again, it may be several years, really — of shares “Dzheneral motors” it will be a major re-rating. Because of this, top and bottom-line booster, it deserves a higher valuation and be less cyclically driven. Then I could see a reasonable case for 11 times earnings and stock price price target Citi.
That’s why some investors unable to justify buying stocks now. Yet a potential catalyst on the horizon, at least we can sleep peacefully at night knowing that we are not paying a huge premium to GM stock. At the same time, we may collect a 4% yield.
In the above chart, you will see various levels of support from 34 $36$. If they give, a decline of $30-ies, of course, possible.
If they hold rallies and broader market, and to return to the $40, it is reasonable for GM stock price.
Bret Kenwell Manager and author of the forthcoming “blue chips” and on Twitter @BretKenwell. At the time of this writing, Bret Kenwell not to take a position in any of the above securities.