General Motors Stock Price Forecast October 2021 – Time to Buy GM Stock?

General Motors stock rose 1.6% yesterday which took its year-to-date gains to 33%. However, the stock is still down 16% from its 52-week highs. Rival automaker Ford is also off its 2021 highs even as it remains among the top gainers of the S&P 500 index.

What’s the forecast for GM stock in October 2021 and should you buy the dip in America’s largest carmaker?

General Motors recent news

Upstart activist firm Engine No. 1 has revealed a stake in General Motors. “GM, with the support of a really strong management team and a great board, has decided that they’re going to embrace the future. They’re going to make the investments necessary in order to be successful during this transition,” said Engine No. 1 founder Chris James.

The company is bullish on GM’s electric vehicle plans. Notably, under the leadership of Mary Barra GM has been pivoting towards electric cars. It became the first and only Detroit automaker to commit to a fully electric future by 2035. While Ford has also outlined aggressive electric vehicle plans and intends to sell only electric vehicles in Europe by the end of this decade, it hasn’t yet put an end date to ICE (internal combustion engine cars).

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GM stock forecast

The forecast for General Motors stock looks positive as it pivots towards electric cars. The investments that the company is making into electric and autonomous driving would drive long-term shareholder value. Wall Street analysts also have a bullish forecast for GM stock and of the 14 analysts polled by TipRanks, 13 rate it as a buy while one analyst has a hold rating. Its median target price of $71.93 is a premium of 33.2% over current prices. The stock has a street-high target price of $90 while $53 is its steel low target price.

GM stock target price

Last month, Barclays reiterated its overweight rating on General Motors stock. “GM is making considerable progress in securing a role in a future world of Disruptive Mobility (shared autonomous driving). And when combined with its ability to overcome a cyclical downturn via structural improvements to the balance sheet and profitability, this should help remove the stigma that GM is a dinosaur facing extinction,” it had said in its note.

General Motors stock long term forecast

The long-term forecast for General Motors stock looks positive. With some of the best-selling models and a well-established sales and distribution network, legacy automakers would give a tough fight to pure-play electric vehicle companies. While Tesla has achieved scale and its annual delivery run rate is almost a million cars, some of the other startup electric vehicle companies have been struggling with execution and production plans. Here is where legacy automakers like Ford and GM would have a competitive advantage. Legacy automakers have decades of manufacturing experience and some of the best-selling models under their belt.

Electric vehicles

To its credit, Tesla has been able to nudge legacy automakers into embracing electric cars. However, while initially, legacy automakers were not serious about electric cars, now they have doubled down on their vehicle electrification plans. Some of the recent models from legacy automakers have been giving a tough fight to models from pure-play electric companies.

Notably, Cruise, which is backed by General Motors, and also counts Microsoft among its investors, sees the revenue potential for its Robotaxi business at $50 billion annually. Incidentally, Tesla is also working on Robotaxis, and previously the company’s CEO Elon Musk had said that it would have a million of them on road by 2020. While the company’s robotaxis are yet to hit roads, Musk believes that most of the company’s valuation comes from the software business, which includes the robotaxi.

General Motors Investors Day

This week, General Motors would hold its two-day investors day. The company might provide more updates on its electric and autonomous plans during the event. Also, the company might provide insights into the chip shortage situation. Notably, GM’s deliveries in the third quarter tumbled amid the chip shortage. Interestingly, while almost every automaker has taken a hit from the chip shortage situation, Tesla delivered a record number of vehicles in the third quarter.

Volkswagen stock had surged earlier this year after it outlined aggressive vehicle electrification plans at its “Power Day.” The company wants to be a leader in electric and autonomous cars by 2025. It has already dislodged Tesla from the pole position in Europe despite being a late entrant to the market.

Should I buy GM stock?

GM stock has seen a valuation multiple rerating over the last year. However, the company’s electric and autonomous driving initiatives are still not fully appreciated by the markets. James is quite bullish on General Motors stock and sees it as a multibagger. “We think that this can become a growth company again. … We think this stock could triple over the next five years.”

Currently, GM stock trades at an NTM (next-12 months) PE multiple of 9.83x. The multiples look reasonable even as the company’s near-term earnings would be subdued due to chip shortage. However, the valuation multiples are a tiny fraction of pure-play EV companies. While it won’t be prudent to compare GM with start-up EV companies, which are growing their revenues in high double-digit or triple digits every year, the valuation disconnect between the two is astonishing.

General Motors stock is looking bullish on the charts also. It has crossed above the 50-day SMA (simple moving average) and now looks set to cross above the 200-day SMA as well. The MACD (moving average convergence divergence) also gives a buy signal for the stock.

Overall, given the upcoming investors day, and the strong technical setup before the event, GM looks like a good stock to buy at these levels.

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