This Stock May Rise 35% as It Speeds Past Tesla

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Shares of General Motors Co. after being left in the dust early last year by those of Tesla Inc., have made a roaring comeback over the past six months, giving investors new hope that the old-time automaker is not an ancient relic yet. While briefly losing its title of largest U.S. automaker by market capitalization to Tesla, GM has since regained that title after its spectacular run in the latter half of 2017, and one analyst believes the stock still has room to climb at least another 35%, according to Barron’s.

Stock Performance

Barclays Analyst Brian Johnson has given GM a price target of $57, a nearly 35% increase based on the stock’s closing price on Wednesday of $42.39, which has bounced back on a strong earnings report on Tuesday after the recent market selloff that took place over the past week.

Year to date (YTD), the stock is up 3.4% compared to Tesla’s 10.8% gain. Over the past year, Tesla has risen close to 34% while GM has climbed nearly 21%. But most of that gain came in the latter half of last year, as GM has climbed 20% over just the past six months compared to Tesla’s decline of 5% over the same period. (For more, see also: Former GM Exec Says Tesla Will Go Bust by 2019.)

Trading at around a multiple of 7 times forward earnings estimates, the stock is among one of the cheapest in the S&P 500, according to Barron’s. If the automaker can prove that it’s not a dinosaur about to go extinct, the stock is a bargain ready to take off. One of the areas in which GM is trying to prove that it can ride with young innovative companies like Tesla, is in the autonomous car market.

The Race for the Autonomous Car

One of the factors that will help give GM a competitive edge is its extra financial muscle compared to that of Tesla. As a new automaker, Tesla is burning through cash at an excessive rate, spending $1.1 billion in last year’s third quarter. While GM spent a total of $1 billion during the same quarter, the established automaker brought in revenue of $33 billion compared to Tesla’s $3 billion in revenues, according to Business Insider.

Still, GM will have to contend with what could be a cyclical downturn in auto sales. U.S. auto sales fell 2% last year, rising interest rates will put downward pressure on new auto loans, and there is a growing inventory of later model used automobiles. This combination of factors could lead to several years of contracting sales and lower stock prices. (To read more, see: General Motors Stock Could Fail Multi-Year Breakout.)

Despite the fall in U.S. auto sales, however, GM reported on Tuesday an adjusted earning per share (EPS) of $1.65 for the fourth quarter, up 21.3% from the prior-year quarter and higher than consensus estimates of $1.39 as reported by Barron’s.