General Motors Stock Price Forecast February 2022 – Time to Buy GM Stock?

General Motors stock looked strong in 2021 amid the rerating of legacy automakers. However, the stock’s returns trailed that of rival Ford. After a gap of five years, GM’s market cap fell below that of Ford.

While GM has historically been the largest automaker in the US, in the fourth quarter of 2021, Ford took the crown. The operating performance reflects in Ford’s stock price as well and last month the company’s market cap surpassed $100 billion. While that may seem a milestone in itself, it is still a tiny fraction of Tesla’s almost $1 trillion market cap. At its peak, startup electric vehicle company Rivian also commanded a market cap of almost $150 billion.

General Motors stock has been volatile

General Motors stock has fallen 7.7% in 2022 and is down 19.5% from the 52-week highs. The stock was in a bear market territory but has since recouped some of the losses. Ford is still in the bear market territory while Tesla and NIO are deep in the bear market territory. What’s the forecast for GM stock and is it a good buy in February 2022?

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GM stock recent developments

General Motors released its earnings for the fourth quarter of 2021 yesterday after the close of US markets. The company reported revenues of $33.58 billion in the quarter, which were below the $37.5 billion that it reported in the corresponding quarter in 2020. Its sales were slightly below the $34.01 billion that analysts were expecting. Supply chain bottlenecks took a toll on the company’s sales in the fourth quarter. Rival Ford, which is set to release its earnings this week, also delivered fewer vehicles in Europe and US in the fourth quarter.

General Motors reported strong earnings in 2021

In the full year 2021, General Motors reported revenues of $127 billion which was higher than the $122.5 billion that it reported in 2020. Meanwhile, the company’s earnings surged in 2021 amid the increase in vehicle prices. It reported a net income of $1.7 billion in the fourth quarter which took its 2021 net income to $10 billion. To put that in perspective, it had posted a net income of $6.43 billion in 2020. It reported an adjusted EBIT margin of 11.3% in 2021 while the net income margin was 7.9%. Its automotive free cash flows were $9.6 billion in the year.

GM provided strong guidance

General Motors also provided strong guidance for 2022. It expects to post a net income between $9.4-$10.8 billion in the year. It has projected an adjusted EBIT between $13-$15 billion in the year. However, the guidance is subject to market factors, especially the chip supply situation. Last year, both GM and Ford had to revise their guidance amid the fluid chip supply situation.

Commenting on the guidance, General Motors CEO Mary Barra said, “With an improving outlook for semiconductors in the U.S. and China, we expect our 2022 results will remain strong. In fact, we expect our EBIT-adjusted earnings to remain at or near record levels in the range of $13 billion—$15 billion, all while investing more year over year in our growth businesses like Cruise, BrightDrop and our rapidly accelerating portfolio of electric vehicles.”

General Motors would not initiate dividends yet

In 2020, both Ford and General Motors had suspended the dividend amid the COVID-19 uncertainty. While Ford has initiated the dividend, GM is yet to initiate a dividend. Investors were left disappointed yet again as the company ruled out a dividend initiation for now. Barra said, “As we move forward, we will consider all opportunities to return excess capital to shareholders, but we will not reinstate a dividend at this time.” She added, “Our clear priority is to accelerate our EV plan and drive growth.” Notably, GM plans to invest $35 billion in electric vehicles and autonomous vehicles by 2025. It expects to spend between $9-$10 billion on these endeavors in 2022 as well.

Last month, the company had announced a $7 billion investment in its four Michigan manufacturing plants. This would be the largest single investment in the company’s history and would help it increase battery cell and electric truck manufacturing capacity.

GM is ramping up EV capacity

GM sold less than 25,000 electric cars in 2021 in the US. However, it is looking to sell 400,000 electric cars in 2022 as it ramps up EV production. It intends to have a production capacity of 1 million electric cars in North America by 2025.

The company’s CFO Paul Jacobson said during the earnings call that “What we’re doing here is essentially redeploying some of the upside earnings from the additional volume into acceleration and taking a longer-term view than just trying to maximize short-term profit.”

General Motors stock forecast

Wall Street analysts are quite bullish on GM stock. Of the 25 analysts covering the stock, 21 have a buy rating while four have a hold rating. Its median target price of $75 is a premium of 39% over current prices.

While GM stock has looked weak after peaking last year, analysts have maintained their optimism. Earlier this month, Deutsche Bank had added General Motors stock to a catalyst buy list. It said, “We are adding GM to our short-term Catalyst Call Buy List, as we believe the company could initiate better than expected 2021 guidance in the $6.00-$7.00 range vs. consensus $5.92, boosted by strong full size truck pricing/volumes/mix, ongoing structural cost savings, and non-repeat of $1.2bn Takata recall charge, partially offset by higher commodity prices and roll-off of COVID austerity measures.”

GM’s guidance came in at $6.25-$7.25 which is even higher than what Deutsche Bank had forecast.

Should you buy GM stock?

GM stock looks a good buy at these prices as the company moves ahead with its EV and autonomous plans. The stock’s valuations look quite reasonable looking at the bloated valuations of some of the pure-play EV companies.

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