General Motors (NYSE: GM) shares have advanced from $28 above $44 in less than three months and the current price stands around $43. General Motors stock has found strong support above $35 but the price is still not able to surpass $45 resistance.
Fundamental analysis: Even with the COVID-19 pandemic, the business of GM is going well
General Motors is one of the largest automobile manufacturers and it is ranked #18 on the Fortune 500 rankings of the largest United States corporations by total revenue. The next several months will be competitive for the global auto industry but even with the COVID-19 pandemic, the sale of GM cars is going well.
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General Motors has released Q3 earnings results this November, total revenue has increased by 0.1% Y/Y and Q1 GAAP EPS was $2.83. General Motors sales in the U.S fell 10% in Q3 to 665,192 vehicles which is very good and above expectations.
The Chevrolet brand experienced the best quarter ever with 45% growth, while the Cadillac brand has also 45% growth. The company also unveiled plans to build electric vehicles and the total investment will be around $2B. The new Cadillac LYRIQ will be the first EV produced at Spring Hill and this will certainly add new customers and increase the revenues of the company.
According to the latest news, General Motors has hired Delta Air Lines executive Paul Jacobson as its new Executive VP and CFO to replace Dhivya Suryadevara. In his last few months as Delta’s CFO, the company raised billions to weather the pandemic and this is certainly good move from GM.
The US stock market hit a record this week thanks to news from pharma company Moderna saying its prospective vaccine was 94.5% effective in preventing the COVID-19. The stocks are also supported with signs of economic recovery in Asia and jump in oil prices.
General Motors shares have advanced this week above $44 and the technical picture implies that the price could advance even more in the upcoming days. General Motors’ valuation is currently near an all-time high and as long the price is above $35 this stock is in the “buy” zone.
Despite this, my opinion is that General Motors is currently a little overvalued and the main drivers of General Motors’s recent capitalization growth are external. This stock could be a good long-term investment but maybe now is not the best time for investing in General Motors shares because the price could weaken in the upcoming weeks.
Technical analysis: Bulls are focused on breaking the resistance level at $45
When we take a look at the chart below ( one year period), we can see that the price of this stock has advanced from $14.3 above $44.
As long the price is above this trend line and $35 support this stock is in the “buy” zone and there is no indication of the trend reversal. If the price falls on the trend line and if we get a “bullish” confirmation candle it would be a very good entry point for short-term traders who are trading with “stop-loss” and “take profit” orders.
The trend line represents a very strong support level, if the price breaks this trend line it would be a very strong “sell” signal and we have an open way to $30. Rising above $45 supports the continuation of the bullish trend for General Motors and the next price target could be located around $47 or even $50.
Some estimates say that the auto market is expected to grow only slightly in the next several years but General Motors will be one of the major players. General Motors shares have advanced this week above $44 and the technical picture implies that the price could advance even more in the upcoming days. Bank of America has a buy rating on GM and a price objective of $65 which is a little optimistic in my opinion.