GM stock, after sinking in Tuesday's stock market action, managed to claw back a chunk of the day's lost ground after General Motors (GM) reported better-than-expected first-quarter earnings and raised guidance for the year.
Wall Street was underwhelmed — like it's been for pretty much everything GM has said and done this year.
GM is about to release its third new Ultium EV, the highly anticipated Cadillac Lyriq, and stands on the cusp of launching commercial robotaxi service in San Francisco.
Yet GM stock has fallen back to levels last seen in November 2020, just after GM revealed the Hummer EV, the first vehicle designed on its Ultium-battery platform.
That was before GM stock really revved up in January 2021, with the unveiling of its BrightDrop commercial van and FedEx (FDX) as its first key customer. Initial deliveries of the Hummer and BrightDrop van came in December.
So why, despite so much progress, has GM stock lost all traction since hitting a record high at the start of 2022? And is now a good time to buy GM stock?
GM Earnings
GM posted an adjusted first-quarter profit of $2.09 per share, down from $2.25 a year ago, but 43 cents ahead of estimates. Revenue grew 11% to $35.98 billion, thanks to sales of higher-priced vehicles, though it was nearly $1 billion less than expected.
The bottom line was far better than the feared 25% profit slide, and GM raised its full-year guidance range by a quarter to $6.50-$7.50. That's despite GM saying it will face an extra $2.5 billion in commodity and logistics costs this year — on top of the $2.5 billion already expected earlier in the year.
The good news is that GM is managing through those cost issues and still has the cashflow to invest aggressively in its EV and AV future. However, CFO Paul Jacobson noted that the 25-cent improvement in guidance actually relates to a tax issue involving its expanded stake in Cruise.
GM's Diminished Expectations
The ongoing chip shortage, commodity inflation and higher interest rates have curbed Wall Street's near-term expectations for GM. However, the repricing of GM stock also reflects downsized longer-term expectations.
GM say it's targeting output of 2 million EVs in 2025, including its hot-selling mini EV in China, with one million in North America. But some on Wall Street don't think GM can come close to reaching that goal amid a shortage of battery materials including lithium.
In a March 21 research note, Morgan Stanley analyst Adam Jonas said he expects GM's EV output to reach only about 300,000 in 2025, excluding its Wuling Hong Guang mini EV.
At its October investor day, GM sketched out plans to double revenue by 2030. But Jonas actually sees GM becoming a slightly smaller company over time, as its EV and autonomous growth avenues fail to fully offset dwindling sales of internal-combustion-engine vehicles.
GM's Big EV Detour
In the tough current stock market climate, investors appear to have lost patience with GM's slow EV ramp.
In Q1, GM sold just 457 EVs in the U.S., including 99 Hummer EVs. The other 358 were Bolt sedans and SUVs, which have now resumed production following last year's massive battery recall. The Bolt is GM's last fully electric vehicle that will be built in the U.S. built on a platform that pre-dates Ultium, so those battery issues aren't an ongoing concern.
However, GM's strategic decision to make a clean break from the Bolt and create a single, flexible platform to accommodate its entire portfolio — from passenger car to pickup truck — amounted to a big detour in the EV race.
Ford Motor (F), for example, raced ahead of GM by sticking with the same plant and platform used by the internal-combustion-engine F-150 pickup for its F-150 Lightning EV model, which just entered production. It will beat GM's Silverado pickup to market by about a year.
While GM is in catch-up mode, its single Ultium platform has enabled the company to cut vehicle development time in half. That could help it chase down rivals also making the transition from ICE vehicles to EVs.
GM moved up the planned launch of the Cadillac Lyriq SUV by nine months, with initial deliveries due next month. Other recently announced models also are on a fast track.
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GM's EV Ramps
A work version of the Silverado EV is due next spring. A $30,000 Equinox SUV is due late next year, while a Blazer SUV is set for production in mid-2023. An SUV version of the Hummer also is on tap for 2023.
BrightDrop's commercial vans are still being built by hand by a company supplier. GM is retrofitting its CAMI assembly plant in Ontario, Canada, where full-fledged production will start in November. That means output will be limited in 2022, but GM has said it could ramp up to two or three shifts starting in 2023.
"We also recognize that we need to launch more EVs faster," CEO Mary Barra said on the Feb. 1 earnings call. "So that's exactly what we are going to do," she said, introducing a two-year target of 400,000 EVs. That likely includes well over 300,000 deliveries in 2023.
On Tuesday, Barra reiterated GM's target to produce a total of 400,000 EVs in North America over this year and next. By comparison, Tesla (TSLA) just managed to deliver 310,000 vehicles in the first quarter of 2022 alone.
Barra said fleet operators and other customers have reserved more than 140,000 Silverado EVs, up from 110,000 three months ago. Hummer EV pickup and SUV reservations, backed by a $100 deposite, have increased to 70,000. GM has previously said that production reservations have been made for more than 25,000 BrightDrop cargo vans.
GM Stock Chart Technical Analysis
GM stock rose 1.9% to 38.75 in early Wednesday stock market action, after falling 4.5% in Tuesday trade. Last week, GM stock hit a 17-month-low 37.60.
Firmly stuck below both its 50- and 200-day moving average, GM stock is now 43% below its record high touched on Jan. 5.
GM stock's relative strength line, the blue line in the chart provided that tracks a stock's performance vs. the S&P 500 index, shows it has lagged the market since June and has fallen to its lowest level since September 2020.
Two rally attempts in the past month have faltered around the 10-week/50-day moving average. If GM stock can retake that line, that would be a positive sign — though not a buy signal.
GM Stock Priced Like An Underdog
As of April 26, GM is valued at $55 billion, just below Ford's $59 billion valuation. Among EV start-ups, Rivian (RIVN) is valued at $28 billion and Lucid (LCID) $29 billion. That compares to $906 biallion for Tesla.
Silverado EV Vs. F-150 Lightning
In one respect, the Silverado EV trounces its most-important current competition, Ford's F-150 Lightning. While starting with a similar base price around $39,900, the Silverado offers a range of 400 miles on a charge vs. 230 miles for the Lightning. An extended-range battery boosts the Lightning's range to 300 miles, but that package starts around $74,000.
GM also said it will provide fast-charging as a standard option, adding 100 miles in range over 10 minutes. Deutsche Bank analyst Emmanuel Rosner called that "another large differentiator" favoring the Silverado vs. the F-150 Lightning.
GM's ground-up design also allowed for a roomier cab and truck bed. But not all the comparisons are so one-sided. While the Silverado holds a slight edge in towing capacity over the base Lightning model (8,000 lbs. vs. 7,700 lbs.), the Lightning can carry a maximum payload of 2,000 lbs. to 1,200 for the Silverado. By going for range with its hefty battery configuration, GM sacrificed hauling capacity. However, later Silverado versions will offer less battery capacity. Towing capacity of up to 20,000 lbs. may be offered by 2025.
Yet success in selling EVs depends on being able to produce them. The Silverado is a year behind the F-150 Lightning. Perhaps more worrisome, GM has not provided transparency with respect to its lithium-ion battery materials.
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BrightDrop And FedEx
FedEx said on Jan. 5 that it has ordered 2,000 additional BrightDrop Zevo 600 and Zevo 410 commercial delivery vans, on top of the 500 previously ordered from the logistics startup created within GM. The initial deliveries of hand-built vehicles were made in December.
There could be more good news on the horizon. FedEx said it has conditionally agreed to buy another 20,000 BrightDrop vehicles. Beyond larger Zevo 600 and mid-size Zevo 410 delivery vans, FedEx also said it may collaborate with GM on a larger truck model.
On top of that, FedEx said it will expand a pilot using BrightDrop's EP1 motorized pallets to 10 markets. The EP1 pallets, which the Zevo 600 can load and unload automatically, make it a breeze to move up to 200 pounds of packages down the sidewalk and from sorting center to delivery van. A pilot in New York saw FedEx Express drivers deliver 15% more packages per hour, while cutting curbside time and eliminating one vehicle from the delivery route.
FedEx has touted plans for EVs to make up 50% of new pickup and delivery vehicles by 2025 and 100% by 2030. "The collaboration with BrightDrop has created an avenue to help achieve these goals, backed by a world leader in the automotive industry," FedEx said in December.
GM also announced that Walmart (WMT) has ordered 5,000 BrightDrop vans to support its last-mile delivery network.
On Sept. 28, GM unveiled the Zevo 410 mid-sized commercial van, saying that Verizon (VZ), among the largest fleet operators, was the first customer to sign up and plans to put it to work as a field maintenance and service vehicle. The vehicle is slated for production in 2023.
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Cruise's San Francisco Progress
GM claims that Cruise has taken the lead in the race to deploy self-driving robotaxis by virtue of its strides in San Francisco's dense, urban environment.
Cruise's permit from the California DMV allows it to serve passengers with no safety driver in San Francisco between 10 p.m. and 6 a.m. at speeds of up to 30 miles per hour. Cruise still needs final approval from the California Public Utilities Commission to start charging passengers for driverless rides.
Barra said that Cruise is on target to cover all of San Francisco around the clock by year-end.
Cruise has been tapped as Dubai's exclusive provider of robotaxi service starting in 2023. That's when GM is expected to launch production of its 6-passenger Origin, which has no steering wheel.
At GM's Oct. 6 investor day, Cruise caused some jaws to drop with its target of $50 billion in annual revenue by 2030. Yet Cruise management has begun to detail its path to scaling up its business in more cities.
As TechCrunch explained: "Cruise is relying on simulations not only to prove out its safety case, but also to scale to new cities without having to perform millions of miles of tests in them first."
Early in 2021, GM announced a partnership with Microsoft (MSFT) to accelerate self-driving vehicles. Microsoft joined in a $2.75-billion funding round for Cruise, along with Walmart, GM, Honda (HMC) and institutional investors. The investment gave Cruise an implied valuation over $30 billion. In March, GM bought a $2.1 billion stake from the struggling Softbank investment group, raising its ownership to about 80%.
However, Apple (AAPL), Alphabet (GOOGL)-unit Waymo, Ford and Tesla are among a large field of well-funded competitors in the autonomous-vehicle market.
GM Stock Investor Day
At GM's Oct. 6 investor presentation, highlights included news that GM will offer Ultra Cruise, a high-end version of its Super Cruise driver assistance system, starting in 2023. Super Cruise now provides hands-free driving on 200,000 miles of highway. Ultra Cruise will launch with coverage of 2 million miles of road.
GM also sketched out its path to doubling revenue by 2030 from its recent average of $140 billion in annual sales. In addition to Cruise's $50 billion, software and services could add $25 billion, including as much as $6 billion from the recently launched OnStar Insurance. The BrightDrop commercial delivery van and logistics business could add $10 billion a year. Total EV revenue should grow from $10 billion in 2023 to $90 billion by 2030, GM says.
GM Defense also will contribute to the total. GM is building some modified versions of the Hummer EV this year for military testing as an electric Light Reconnaissance Vehicle, or eLRV.
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Is GM Stock A Buy?
GM stock has a lousy 16 IBD Composite Rating out of a possible 100. The hit to earnings from Covid, the chip shortage and commodity inflation have distorted the picture.Yet there is undoubtedly lots of execution risk in relying on profits from gas-burning SUVs today to pave the way to an EV future. Competition from Tesla and other well-funded competitors will be intense.
GM stock is stuck near its lowest level since the fall of 2020 after Morgan Stanley's downgrade cast doubt on the likelihood of a smooth transition for GM to EVs from ICE vehicles. While further EV and self-driving strides could begin to unlock GM stock's potential, a long period of base-building is likely ahead.
Bottom line: GM stock is not a buy.
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