Shares of General Motors Co (NYSE: GM) have slipped roughly 4.0% in less than 48 hours after the car manufacturer gave conservative guidance for its fiscal Q4 on restricted supply of semiconductor chips.
But RBC Capital Markets is convinced GM has substantial “trapped value to unlock”.
GM is in the middle of a transformation
In a note to clients this morning, RBC’s Joseph Spak reiterated General Motors at “outperform” with a price target of $74 that represents a 35% upside from here.
Spak’s bullish call is based on GM’s plans of becoming a U.S. leader in electric vehicles by 2030. The automaker has pledged $35 billion in investment for the transformation that Spak sees as a “compelling long-term story”.
On top of EVs, General Motors is also committed to self-driving vehicles. Its CEO Mary Barra is confident that GM’s autonomous vehicles unit, Cruise LLC, can “remove the driver in 2022”.
General Motors needs to attract new investors
Spak, however, agrees that the road to making the “transformation” story reflect in the stock price could be a difficult one because hitting the EV and AV related targets requires higher spending that makes the current value/cyclical investors a bit nervous.
The RBC analyst, therefore, advocates the need for General Motors to bring in new investors that are focused more on growth and ESG.
The growth investor will focus on what GM can become and is willing to look through, even cheer on investment to get there.
He says the stock is struggling because the long-term story hasn’t yet caught up, and short-term metrics like free cash flow and operating margins, which matter more to the “old” GM, continue to limit the share price.
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