Artificial Intelligence Identifies General Motors (GM) As A Top Buy For May

General Motors
closed down 0.12% on Monday, ending the week at $57.15 on the back of almost 11.5 million trades. As this stock’s popularity remains high, its prices have soared significantly over the last year – almost double its five-year highs. However, recent days have seen GM slip, as reflected in the 10-day price average of $57.41.

General Motors Co. is the largest U.S.-based automaker. They engage in designing, manufacturing, and selling vehicles and their component parts around the world under popular brands such as Chevrolet, Buick, Cadillac, and of course, GMC. The company has seen a lot of turbulence over the last decades, but surprisingly, post-pandemic life has soothed some of the hurt with increased vehicle sales, which in turn has reflected positively on its stock.

Thus far, GM is up over 41% YTD. runs factor models daily to get the most up-to-date reading on stocks and ETFs. Our deep-learning algorithms use Artificial Intelligence (AI) technology to provide an in-depth, intelligence-based look at a company – so you don’t have to do the digging yourself.

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General Motors (GM): Before the Earnings

General Motors will open Wednesday with its Q1 2021 earnings, which is sure to send a buzz through the market. But before its report splashes across the internet and sends its stock skyrocketing (or not), we thought we’d recap GM’s last year in depth.

Historically, GM has seen good things abound from its earnings reports, and this last year was no different. While its revenue only beat market estimates in 3 of the last 4 quarters, its earnings topped expectations across the board. But that doesn’t mean the company didn’t have to deal with a few unexpected contingencies.

For instance, last quarter’s earnings report saw an increase in unit sales, which boosted GM’s bottom line. But at the same time, the company noted that competitive pricing pressures offset the effects of these sales – so as units left the lot in droves, profits didn’t reach expected heights.

Still, it’s likely that GM will report increased auto sales again this quarter, as cars are flying off lots around the world. In fact, April’s U.S. auto sales alone came in at an annualized 18.5 million, the highest level since 2005. And GM’s joint ventures with Chinese automakers has driven its performance in international markets, with the Chinese market raking in $248 million in equity income in Q4/20 alone.

The Future of GM (from a Semiconductor’s Point of View)

However, it’s difficult to say what GM’s forward-facing guidance will look like. While car sales (and profits) are up around the globe, it’s important to recognize where the global semiconductor shortage has hit: right in the engine.

Despite its remarkably good performance, in the first months of 2021, GM’s U.S. sales took a squeeze on the back of the global semiconductor shortage. Many vehicle manufacturers – GM included – were left high and dry right as the post-pandemic market clamored for new vehicles.

To cope with this unfortunate reality, GM diverted its limited inventory to high-profit retail sales, which saw an increase of 19% in the first quarter. However, GM’s 3.9% increase in first quarter U.S. sales came at the expense of its fleet delivery production line, which fell 35% from Q1/20.

Unfortunately, it appears that the auto industry’s woes won’t come to an end anytime soon, as reports indicate that semiconductor production may not hit pre-pandemic highs for at least six to twelve months. And in fact, the problem is anticipated to get better before it gets worse.

Sustainability on the Horizon

But there’s hope of another kind on the horizon. On 30 April, GM also released its Annual Sustainability Report, reviewing ESG performance in 2020 and outlining guidance for future environmental goals.

Included amongst its forward-facing endeavors are goals to achieve greater than 90% waste diversion from landfills and incineration globally by 2025, go zero-waste by 2030, and reduce operational energy intensity by 35% by 2035 (compared to 2010 baseline).

Additionally, GM aims to go carbon-neutral by 2040, with aspirations to eliminate tailpipe emissions from new light-duty vehicles by 2035. GM also signed an open letter to President Biden to support the administration’s commitment to climate action. The company also noted its approval for a federal climate target to reduce emissions by 2030.

General Motors by the Numbers

Despite a year of hard decisions and lackluster performance, GM still came out better than expected across the board. For instance, the company’s revenue came in at $12.2 billion – though this is still below its $14.7 billion revenue three years ago.

On the other hand, its operating income is up from $6.3 billion to $8.6 billion, while its ROE hit 13.22% in the last year. And while its per-share earnings fell from $5.53 three years ago to $4.33 this year, the company does see (limited) room for growth, with a forward 12-month P/E of 10.51.

What Does Our AI Have to Say?

All this data comes together to paint a picture of a recovering automaker making tough decisions to do right by its profit margins, its shareholders – and even the environment. Although some issues (such as semiconductor shortages) are out of GM’s hands, they’ve taken steps to mitigate the damage and bolster their performance where possible.

But what does our AI have to say about General Motors? has graded General Motors based on our internal factor models, and we’ve determined that the company has earned a B in Growth and C’s in Technicals, Low Volatility Momentum, and Quality Value. And, unless its earnings report reveals something positively shocking, GM is a Top Buy for the month of May.

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