A More Balanced Perspective on Electric Vehicle Spending Boosts General Motors Stock

Wolfe Research analyst Rod Lache has recently upgraded General Motors (GM) stock to Buy from Hold, while also setting a $42 price target, representing an increase of approximately 20% from current levels.

Lache highlights the potential benefits that automakers may derive from falling interest rates. According to him, reduced rates could spur auto demand by making car payments more affordable. Furthermore, GM’s recent decisions on capital allocation present a compelling proposition for investors interested in owning this stock.

In October, GM announced a reduction in planned spending related to electric vehicle (EV) assembly, as EV demand did not expand as rapidly as anticipated in previous years. However, it is worth noting that EV demand is still growing, albeit at a slower pace. In 2023, Americans purchased around 1.1 million all-electric vehicles, marking a 45% increase from 2022. Additionally, EV sales surged nearly 65% from 2021 to 2022.

GM managed to sell approximately 76,000 battery EVs in 2022, compared to around 39,000 in the previous year. This accounted for about 7% of all EV sales in the U.S. during that period. Overall, GM sold roughly 2.6 million units, representing nearly 17% of all light vehicles sold in the country.

Following the positive assessment by Wolfe Research, GM’s shares have experienced a 2.4% surge in premarket trading, reaching $36.11. In contrast, S&P 500 and Nasdaq Composite futures remain relatively stagnant.

Notably, GM’s stock had reached a low point of just under $27 in early November, coinciding with the conclusion of UAW labor negotiations. The finalized contract offered some relief and certainty for investors. With the new agreement in place until April 2028, GM’s shares have climbed approximately 35% since then.

Regarding analyst opinions, approximately 69% of analysts covering the company now rate its shares as Buy. The average analyst price target for GM stock stands at around $45.50, signaling a potential increase of approximately 25% from current levels. By comparison, the average Buy-rating ratio for stocks in the S&P 500 is roughly 55%.