DETROIT – Wall Street is expecting a lot from General Motors’ two-day investor event that starts Wednesday afternoon – from specific revenue and earnings targets to new details about its electric and autonomous vehicle operations.
But what GM investors really want is a roadmap for sustainable shareholder growth. It’s something the automaker has flirted with under CEO Mary Barra but never been able to retain.
The stock has swung wildly under Barra’s reign, from a 60% surge in share price to an almost as big drop since she took the helm in January 2014, according to FactSet. Before this year, shares of GM were largely down since Barra took the reins. They’re now up by 36%, with almost all of that growth coming this year alone.
That type of growth is what analysts believe could continue if GM can swiftly deliver on its plans to transform the company — at least in investor eyes — into more of a technology company than a traditional automaker.
“With the core objective of GM’s investor day centered on demonstrating the growth opportunities ahead for GM, we expect a case to be made for GM multiple expansion … which we believe it merits,” Credit Suisse analyst Dan Levy said in an investor note Friday. “We believe a clear case can be made for GM stock north of $100.”
Deutsche Bank analyst Emmanuel Rosner said the event “could serve as a positive catalyst for the stock” if GM meets investor expectations, specifically regarding its plans for electric and autonomous vehicles.
Morgan Stanley analyst Adam Jonas noted several key growth areas and business opportunities for GM, while questioning whether the event will “simply reinforce what many already believe about GM or can it catalyze a more significant change in strategic path?”
Like investors, Barra and her executive leadership team are hoping for the latter. Here are five ways GM is going to try and make that happen.
Investors should expect an unprecedented amount of details during the event, including specific targets regarding revenue, profit margins and the outlook on total market size for early expansion businesses like self-driving taxis.
It’s one of two things Jonas believes will be important for GM to accomplish: “Provide the transparency and disclosure to help the analyst and investment community to both model and value the company’s critical tech-oriented business units,” he said in an investor note last week.
GM’s revenue last year was nearly $122.5 billion, down 10.8% compared with 2019 thanks largely to factory shutdowns at the beginning of the coronavirus pandemic. It still made $6.4 billion in net income for the year while its adjusted operating profit was $9.7 billion, or $4.90 a share, in 2020.
The other important thing for GM is leaving the “investment community with the sense of urgency that the company is taking the necessary steps to attract the necessary capital and talent to allow GM’s capabilities to be successful,” Jonas said.
Barra and other GM executives such as President Mark Reuss and CFO Paul Jacobson are expected to discuss how the automaker is investing as fast as possible in electric and autonomous vehicles to bring the technologies to market more quickly.
GM earlier this year said it would invest $35 billion in electric and autonomous vehicles by 2025, up 30% from plans announced late last year.
Under that investment, GM has said it would offer 30 new EVs by 2025. The company is expected to better detail its transition from an automaker heavily reliant on vehicles with internal combustion engines to exclusively offering electric cars and trucks by 2035.
“We continue to believe GM offers a compelling EV strategy, with one of the most holistic and ambitious EV strategies of legacy OEMs, underlying our positive outlook on GM. That said, it’s now time for execution, as we await data points indicating GM can maintain market share and profitability in an EV world,” Levy said.
The investor event overall is expected to provide a “clear strategy” in an effort to increase the company’s valuation to be more like a technology company, much like Tesla is at more than $740 billion. GM’s market cap is about $79 billion.
Dan Ammann, CEO of GM’s majority-owned autonomous vehicle subsidiary Cruise, will tell investors that it sees a path for its ride-hailing business to reach $50 billion in revenue as it ramps up operations.
He won’t detail a specific timeline to hit such a milestone, but he’s expected to explain how they plan to build it up fast, if not faster, than other transformative businesses, according to a person who is familiar with the plans, which were reported earlier by Bloomberg.
GM also is expected to discuss additional details about its hands-free Super Cruise driving system, which it has promised to offer on 22 models by 2023.
GM wants to increase recurring revenue and customer loyalty through a new internally developed software system for vehicles that it’s calling “Ultifi.”
“That’s a goal. The more we integrate our product into their lives and the better we make … certainly that’s what we want to achieve. It’s not a guarantee,” Scott Miller, GM vice president of software-defined vehicle, told reporters last week during a call.
The automaker aims to integrate the software platform into customers’ digital lives through software features, apps and personalized services that will be regularly updated remotely. That could include paying for new services such as its hands-free highway driving system and other technologies.
– CNBC’s Michael Bloom contributed to this report.