GM Extends $5B Credit Line to Self-Driving Subsidiary Cruise

General Motors (GM) has provided a $5 billion line of credit to Cruise, its self-driving subsidiary. Cruise plans to launch a self-driving ride-hailing service. It intends to use the credit line to expand its fleet of Cruise Origin vehicles and scale up operations over the next few years.

The Origin is a self-driving electric vehicle. GM will manufacture the vehicle and has started assembling about 100 Origins for testing and validation. At the same time, the automaker is preparing a factory to produce the Origins by the tens of thousands. (See General Motors stock analysis on TipRanks)

Including the credit from GM, Cruise now has more than $10 billion of capital. While that looks like a lot, Cruise CEO Dan Ammann says the amount is necessary, considering the work the company is trying to accomplish.

“While I’m incredibly proud of what we’ve accomplished to date, I’m very much humbled by the fact that we’re really just approaching the starting line of what will be the transportation transformation of the century,” said Ammann.

Last month, Argus Research analyst Bill Selesky reiterated a Buy rating on GM stock and raised the price target to $66 from $62. Selesky’s new price target implies 8.53% upside potential. The analyst says GM has a strong balance sheet now and expects it to resume dividend distribution soon.

“GM continues to diversify its business as it expands into electric and autonomous vehicles. It also benefits from high margins in North America, solid cash flow, and a strong balance sheet,” noted Selesky.

Consensus among analysts is a Strong Buy based on 12 Buys and 2 Holds. The GM average analyst price target of $70.77 implies 16.38% upside potential to current levels.

GM scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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