GM Earnings Preview
General Motors (GM) reporting earnings on 10/27 before the open with the Street looking for $0.82 on $26.65B in sales, a 25% decline Y/Y. Next quarter is guided to $1.14 and $31.95B while the FY is $6.11/$125B. Shares have closed higher in five of the last eight with an average closing move of 3% and a max move of 8.9%. The current implied move is 4.15%. The $83.45B company trades 8.45X earnings, 0.60X sales, and 4X FCF. GM is coming off a mixed quarter that was weighed on by the Bolt recall while their outlook was mixed due to the ongoing supply chain issues. GM is likely to trim production estimates again due to ongoing constraints, but they likely realized strong ASPs during the quarter to mitigate some cost headwinds while demand should be robust. GM’s long-term outlook remains the best of the major automakers with their EV strategy and tech-forward initiatives like Ultium, their modular platform and battery system, and Ultifi, their connected services business. The company laid out plans at their investor day in early October and expecting to shift into commercialization of some of their biggest projects like Cruise over the next two years before scaling rapidly. Analysts have an average target for shares of $70.50 with a Street High $90. JP Morgan raising estimates on 10/21 seeing a large beat in Q3 even considering the supply chain impacting the automaker’s North America production. Tigress positive on 10/15 seeing the company being well-positioned to become the industry leader in EV and Autonomous Vehicle technology and production. They think the launch of new models, new technology, and new business lines will drive revenue growth in the next 2-3 years. Short interest is 1.96%. Hedge fund ownership fell 6.5%. On the chart, shares are flagging above the rising 21-EMA and VWAP from the September lows with a breakout above $59 measuring out to $63. GM has been in a bigger range since January and a breakout above $63.85 has longer-term potential to run to $80. Options flow has been bullish including buyers in the November $59 calls 9000X on 10/21 and buyers in the February $62.50 calls 2000X. The November $57/$64 call spread was bought 10,000X on 10/20 while the December $60/$50 bull risk reversal opening 25,000X recently as well. The December $57.50 calls also with a size buyer of 27,950X in mid-October.