Looking for a Growth Stock With a Dividend Kicker? Try GM.
General Motors (NYSE:GM) is firing on all cylinders. Plus, the American auto sector is again accelerating. Moreover, GM’s longer-term prognosis is quite good, as the automaker’s electric-vehicle business looks poised to thrive. Better, GM appears well-positioned to launch a lucrative robotaxi business. Given these points, I’m very bullish on GM stock, and I recommend that investors buy shares. GM is particularly well-suited for relatively conservative investors who are looking for a safe play on the EV and self-driving megatrends.
GM Reported Strong Q1 Deliveries
GM’s deliveries soared 18% last quarter to over 603,000 vehicles. Additionally, GM delivered a strong total of more than 20,000 EVs, with the sales of its affordable Bolt EVs again setting new records. As I’ve written in previous columns, I believe that the Bolts could get young consumers interested in GM’s EVs, leading them to buy more expensive GM EVs as their salaries climb in the future.
The U.S. Auto Sector Is Strengthening
With auto inventory levels increasing, signifying a normalization of supply chains, U.S. auto sales climbed almost 6% last quarter year over year, as Cox Automotive forecast on March 28. In fact, Cox noted, “With the job market still strong, the largest demand problem for automotive in 2023 will be rising interest rates that push many would-be buyers out of the market.”
In addition, as I wrote in a recently published column on housing, I believe that “the fact that the Federal Reserve is probably done raising rates this year will put downward pressure on rates” going forward, while it appears likely that the Fed will cut rates in 2023 as inflation ebbs. Just as lower rates later in the year will help the housing market, they will also enable American auto sales to exceed expectations, improving GM’s financial results.
GM’s EV and Robotaxi Businesses are Poised for Success
By the end of 2023, GM intends to offer no fewer than seven EV models. In addition, there are signs that demand for the automaker’s current EVs, including its Cadillac Lyriq, its BrightDrop delivery van, and its Hummer truck, is very strong. As GM offers more EV models, sales should soar, resulting in a far better valuation for GM. Torque News’ Justin Hart, agrees, noting that, “With [seven] models on offer, GM is primed to overtake Hyundai Motor Group and Ford as the 2nd largest EV manufacturer in the US market this year.”
Meanwhile, Tigress Financial analyst Ivan Feinseth is upbeat both on GM’s EV business and its “autonomous vehicle technology.” He believes that the automaker is poised to become “one of the world’s leading developers of EVs and future automotive technologies.”
Indeed, GM Cruise, the automaker’s self-driving unit, is now offering driverless rides in San Francisco, Austin, and Phoenix and recently applied to test its vehicles in the entire state of California. And last Nov., Cruise, which is also testing its autonomous vehicles with Walmart (NYSE:WMT), stated that it intends to start operating in a “large number of markets” and operate “thousands of vehicles.”
Consequently, I believe that, in the next six months, investors will start to become excited about GM’s robotaxi business, which should indeed eventually become quite lucrative, given its low labor costs and the many customers that it should attract.
The Bottom Line on GM Stock
GM’s auto business is already bouncing back, and its EV and robotaxi businesses are poised to become very successful. With GM stock trading at a tiny forward price-earnings ratio of 5.5 and adding a dividend kicker that provides a 1% yield, the shares are very attractive for both growth investors and value investors.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
