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Tuesday, November 24, 2020

Is General Motors a buy or sell in September?

  • The price of General Motors stock has advanced from $15 above $33 in less than six months
  • Wall Street is bullish on General Motors and this stock could be a good “BUY” opportunity
  • The company has paid more than $6B dividends to its shareholders in the last three years
  • General Motors became a strategic manufacturing partner of Nikola

The price of General Motors (NYSE: GM) stock has advanced from $15 above $33 in less than six months and the current price stands around $30,40. General Motors became a strategic manufacturing partner of Nikola and the company’s business will probably continue to grow.

Fundamental analysis: GM stock is not overvalued

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The price of the stock advanced after the company reported that GM will be a strategic manufacturing partner of Nikola. According to this deal, Nikola will utilize General Motors’ Ultium battery system and Hydrotec fuel cell technology which will add value to both companies. This partnership will help proliferate General Motor’s newly developed Ultium battery systems and lower costs of production.

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Deutsche Bank is positive on the GM-Nikola deal and views this deal very positively for GM. Morgan Stanley also views the General Motors -Nikola partnership a win for both companies and this partnership will give more credence for GM shareholders. GM also announced that is working with Analog Devices on the project that could be very important for the future of the auto industry. It is important to mention that Berkshire Hathaway increased its position in GM and has more than 5% of the car company’s shares outstanding.

The company decreased its revenue in 2019 to $122.6B from $133.04B in 2018 but the growth projects will ensure that the numbers will be moving up in the future. If we compare total stockholders’ equity of $43B and the market capitalization of $43.5B, we can notice that this stock is not overvalued and maybe now could be a good time to buy this stock. Another useful information for potential investors is that this company has paid more than $6B dividends to its shareholders in the last three years and this number can be even bigger in the future.

Technical Analysis: GM has a very good risk/reward ratio


gm
Data source: tradingview.com

In my opinion, this stock has a very good risk/reward ratio and investors in General Motors stand to gain a lot more for taking a comparatively smaller risk. On this chart, I marked current resistance and support levels. The current supports levels are $30 and $26, $34 and $38 represent the current resistance levels.

If the price jumps above $34 it would be a “BUY” signal and we have the open way to $36. Rising above $38 supports the continuation of the bullish trend and the next price target could be located around $40. If the price falls in the upcoming period, every price in a range from $20- $25 could be a very good opportunity to buy this stock.

Summary

Shares of General Motors could be a good investment option and most financial analysts are also expecting its price to rise considerably in the next several years. General Motors became a strategic manufacturing partner of Nikola and this partnership is a win for both companies.The company has paid more than $6B dividends to its shareholders in the last three years and this number can be even bigger in the future.

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