General Motors (GM), one of the world's largest automakers, traces its roots back to 1908; the firm continues to diversify its business as it expands into electric and autonomous vehicles, observes Bill Selesky, an analyst with Argus Research.
The company has one of the most diversified portfolios within the Automotive OEM sector and has multiple ways, in our view, to enhance shareholders value through electric vehicles (EVs), legacy vehicles (Internal Combustion Engines), and Autonomy.
Additionally, General Motors also has leading North American margins, generates strong free cash flow, and has a robust balance sheet.
Furthermore, we believe that near-term difficulties with semiconductor shortages, supply-chain disruptions, and commodity price inflation are all manageable circumstances that GM will be able to address. With demand remaining strong, a new earnings growth cycle should begin to take hold starting in 1H22 as we see it.
We also believe that investors have undervalued the company's strength in traditional internal combustion vehicles, as well as its Chinese JV, Ultium battery, and financial services businesses.
Upcoming EV launches are on track, with the HUMMER EV released during the fall of 2021 and the Cadillac LYRIQ expected in the first half of 2022. We believe these launches will serve as positive events for the company.
Prior to the pandemic, General Motors had paid a quarterly dividend of $0.38 per share, or $1.52 annually, for a yield of approximately 4.4%. However, the company suspended the dividend on April 27, 2020. We now expect the dividend to be reinstated in late 2022. Our 12-month target price is $66.
