GM CEO Mary Barra. Bill Pugliano, Getty Images

GM Stock Rises as $30 Billion Business Emerges From Tech Bet

GM shares have jumped about 11% since September 22, and plans announced this week to introduce 20 fully electric cars globally by 2023 didn’t hurt matters.

A surprising theory is fueling a long-awaited breakthrough for General Motors Co. shares: that the stuffy century-old automaker could have some technology chops, after all.

Bullish reports from a Deutsche Bank analyst who sees a $30 billion business emerging from GM’s bets on self-driving and shared cars has culminated in the stock closing at a record each day this week. Analyst Rod Lache upgraded GM to a buy last month and said Monday that management didn’t refute his prediction the company will spin off its mobility business.

The stock climb is a big turnabout for GM. For years, the shares were stuck in neutral as investors were smitten by Tesla Inc. as the better bet on where the industry was headed — toward a future where plug-in cars pilot themselves between charges. Another fear was that the rise of ride hailing championed by Uber Technologies Inc. and Lyft Inc. would disrupt auto ownership and leave GM clinging to an outdated business model.

Instead, GM has been putting the pieces together to compete with those companies head-on. The automaker acquired Cruise Automation last year to develop autonomous vehicles that are now ready for mass production. GM’s car-sharing business Maven is expanding, leading the company to consider deploying automated autos through a Cruise app, via Maven, or through a partner like Lyft, which the carmaker invested in last year.

“GM’s AVs will be ready for commercial deployment, without human drivers, much sooner than widely expected,” Lache wrote in his report this week, adding that they could be ready within quarters, rather than years. “This will be material, even to a company of GM’s size.”

Stock Climb

GM shares advanced as much as 0.7% to $44.08 on Thursday and have jumped about 11% since Sept. 22, the last trading day before Lache recommended the stock and raised his price target to $51 from $36. He said GM’s mobility business by itself may be worth $20 a share.

Lache isn’t alone in pushing up GM shares. The stock gained after the company announced plans this week to introduce 20 fully electric cars globally by 2023, reinforcing the view that it’s going to be prepared to respond if consumer demand starts shifting to battery-electric vehicles.

The pressure on GM and crosstown rival Ford Motor Co. to dispel the notion they’ll lose out on the rise of electrification and autonomy has been intense. Famed activist investor David Einhorn mounted an unsuccessful bid for GM board seats early this year and chided management for the stock trading near its 2010 initial public offering price. Ford ousted CEO Mark Fields in May and replaced him with Jim Hackett, who used to lead the company’s mobility unit.

Undervalued Shares

Both Deutsche Bank and Morgan Stanley have made the case that GM is undervalued. Morgan Stanley’s Adam Jonas made GM one of his top-three stock picks on Sept. 21, though his combined valuation of the company’s shared mobility and autonomy businesses are only about $4 billion, much lower than Lache’s.

Others are skeptical of assigning such a big valuation to GM’s mobility business. RBC Capital Markets analyst Joseph Spak estimated the company’s technology units may be worth about $6 per share in a report Thursday.

Counting pension obligations — a symptom of being an old-line industrial company, if ever there was one — Spak arrived at an estimation that GM shares probably should be trading in the mid-$40s, roughly in line with where the stock is now.

“It’s too early,” he wrote, “to call GM a winner.”

By David Welch

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