Wedbush analyst Dan Ives has issued a buy rating for the stock of General Motors Co (NYSE: GM), citing its focus on electric vehicles. Notably, Ives, who already covers major tech firms such as Apple (AAPL) and Microsoft (MSFT), in addition to Nikola (NKLA) and Tesla (TSLA), has started covering GM from Thursday last week. The stock closed at $58.76, up $2.70 or 4.82% from the prior close.
According to the analyst, the Detroit, Michigan-based company caught the attention of Wall Street following its dedicated approach towards electric vehicles. Ives believes that the company’s electric vehicle initiatives have rejuvenated the company. The improvement, as per Ives, has come after the company’s CEO, Mary Barra, faced several ups and downs in the initial stage of her tenure. Overall, the makeover necessitates a value re-rating as per the analyst.
The century-old company has made considerable investments in battery production, and also in electric vehicles and autonomous driving systems. Interestingly, the auto manufacturer’s electric vehicle Cred has received good reviews and is expected to boost the company’s valuation in the months ahead.
Re-rating implies that investors could be paying a higher price to own the stock as the valuation multiple on earnings is poised to increase based on projected growth and business strength. Notably, the company generated profits even during COVID-19 induced recession. That confirms the stability and robustness of its business. The company is also investing billions into electric vehicles in order to stand shoulder to shoulder with electric vehicles produced by Tesla.
Based on the aforesaid reasons, Ives has given a buy rating for the stock with a price target of $85 per share.
The stock currently trades at roughly eight times the predicted 2022 earnings. The price target issued by Ives transforms to roughly 11 times his 2022 earnings outlook of $7.56 per share. By contrast, the S&P 500 trades at roughly 20 times, while Tesla stock trades at approximately 100x the predicted 2022 earnings.
In the year-to-date, the stock has appreciated by roughly 35%, eclipsing the gains recorded by the S&P 500 and Dow Jones Industrial Average.
This is not the first time for a tech analyst to cover Tesla. However, this seems to be the first instance of a tech analyst covering GM stock. Interestingly, a section of GM analysts do cover other industrial stocks, but a majority of them cover only the automotive industry.
The stock remains popular among Wall Street analysts, with buy ratings from over 90% of them covering the company. This compares with a 55% buy-rating ratio for the S&P stocks.
The buy rating from the renowned analyst of Wedbush is expected to keep the stock range-bound with a slight bullish bias in the short term.
Technically, the stock is moving along the ascending trend line, as shown in the image below. Additionally, the stock has been consolidating around $55 levels for a while. The Chaikin money flow indicator also has a positive reading. Hence, the stock is expected to begin another uptrend in the days ahead.
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