Shares of General Motors (NYSE:GM) surged on Monday after it was announced that the automaker is ready to debut its semi-autonomous driving technology. The question is, should investors consider buying GM stock?
A dozen Cadillac CT6 sedans outfitted with GM’s new “Super Cruise,” hands-free driver assist technology will depart from New York on Monday and drive all the way to Los Angeles in a demonstration of GM’s new self-driving car technology. The news sent GM stock up over 2.60% to a hit new 52-week high.
The auto giant’s stock price has climbed overall despite some fluctuation in the last year. However, GM is coming off a less-than-stellar second quarter and the auto industry is somewhat in flux.
The company is trying to evolve amid shifting consumer demand, and its new hands-free driving technology might help set GM apart from fellow U.S. automakers. Now,let’s take a look at GM and its current fundamentals to see if its stock might be a good investment at the moment.
Recent Moves
In late July, GM beat earnings expectations but missed revenue projections despite posting $37 billion in sales during the second quarter. GM then announced that it will likely be bogged down in the second half of 2017 as it makes changes to reduce its overstocked car inventory.
Yet, GM said it delivered 725,000 vehicles in the U.S. last quarter, which was bolstered by a 24% jump in crossover vehicles sales.
“We are always going to be focused on aligning supply and demand, and as we have seen the shift from passenger cars to crossovers we have taken very proactive action to reduce our production of passenger cars," GM CFO Chuck Stevens said in an interview with CNBC.
GM’s new self-driving, Super Cruise technology features an array of safety features, and will be restricted to limited-access, divided highways and interstates, but the basic concept is simple enough: drivers don’t need to keep their hands on the steering wheel at all times (also read: GM Stock Hits New 52-Week High As Semi-Autonomous Cadillacs Hit The Road).
Coming up on @TODAYshow - the first hands free car is taking off on a coast to coast trip. I'll take you along for a ride. pic.twitter.com/KTB4D3E90Y
— Tom Costello (@tomcostellonbc) September 25, 2017
Super Cruise-equipped Cadillacs will start to ship to dealerships this week, with the semi-autonomous, self-driving system set to come standard in Cadillac CT6 Platinum models.
Current Fundamentals
GM stock scored an “A” for Value and a “B” for both Growth and Momentum in our Style Scores system to earn an overall VGM grade of “A.”
Value investors should like what GM stock has to offer. The established automaker’s stock is currently trading at 6.39x earnings, which is outstanding compared to the overall market and great compared to the “Automotive – Domestic” industry’s average. GM’s P/B ratio of 1.25 beats the industry average and rival auto giant Ford’s (NYSE:F) 1.44. The company’s 0.69 PEG ratio also comes in below the industry average.
GM’s23.25%cash flow growth crushes the industry average of a 0.57% decline and helps to show that the company is on a solid growth trajectory. The company’ stock price experienced a 12.23% year-to-date positive price change, which topped the industry average of 3.64% and beat out the S&P 500’s 10.16% increase.
Shares of GM jumped over 2.60% on Monday to hit a new 52-week intraday trading high of $40.64 per share. The move is part of a solid climb for the car company over the last month. However, the company’s stock price could be set to retreat.
Based on Zacks current consensus estimates, GM’s sales are expected to fall 7.88% this quarter and 7.61% for the year. The company is still projected to post revenues of up to $165.33 billion. However, GM’s earnings are expected to tank 37.46% this quarter and dip by 0.05% for the year, based on our current consensus estimates.
Within the past 60 days, GM has received four negative earnings estimate revisions for the current quarter and next quarter, as well as one positive and two downward revisions for its full year.
Bottom Line
Shares of GM rest at a new 52-week high and the company sports some great value and momentum metrics. But GM’s recent string of downward earnings estimate revisions help make the automaker a Zacks Rank #3 (Hold).
Potential investors might be impressed by GM’s new self-driving car technology and could be encouraged by the fact that the company is shifting its output based on changing consumer tendencies. Still, it seems that investors might consider caution rather than speeding into GM stock.
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