General Motors (GM) announced plans to escalate deliveries to dealers and customers across the U.S. and Canada.
Following the announcement, shares of the company jumped 6.4% to close at $63.46 on June 3.
General Motors now forecasts its first-half results to be “significantly better than prior guidance” and also predicts strong full-year results.
The expected beat will be driven by the newly accelerated timeline and enhanced volumes as a result of robust demand witnessed for Chevrolet, Buick, GMC, and Cadillac. It emanates from the benefits seen from GM’s ongoing efforts to prioritize semiconductor usage that maximize the utilization of chips.
As an indication of the strong demand, the U.S. assembly plants in charge of the most capacity-constrained GM cars have been instructed not to take any dedicated vacation downtime this summer, the company said. (See GM stock analysis on TipRanks)
However, management stated that based on the continuing global semiconductor shortage, production at some of its manufacturing facilities in North America, Asia, and South America will continue to be impacted through June and July.
GM’s VP, North America Manufacturing and Labor Relations, Phil Kienle commented, “The global semiconductor shortage remains complex and very fluid, but the speed, agility and commitment of our team, including our dealers, has helped us find creative ways to satisfy customers.”
Kienle further added, “Customer demand continues to be very strong, and GM’s engineering, supply chain and manufacturing teams have done a remarkable job maximizing production of high-demand and capacity-constrained vehicles.”
On May 18, Argus Research analyst Bill Selesky reiterated a Buy rating and increased the price target from $62 to $66 (4% upside potential) on the stock.
Selesky said that the Q1 beat was driven by the successful launch of full-size SUVs, higher-priced full-size pickups, and elevated prices of used vehicles, partially offset by increased raw material and commodity costs. The analyst considers GM to be an attractive investment based on valuation and increased his FY21 EPS estimates.
Overall, the stock has a Strong Buy consensus rating based on 11 Buys and 2 Holds. The average analyst price target of $68.67 implies 8.2% upside potential from current levels.
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