Analyst Note| David Whiston, CFA, CPA, CFE |
Cost-cutting measures induced by the pandemic enabled GM to post an outstanding third quarter. We are raising our fair value estimate to $52 from $50 on improved 2020-21 performance than previously modeled and due to 2020 U.S. industry light vehicle sales having a chance at 14.5 million, compared with the low 13 million range in our model. We also halved the value from a possible Nikola deal (see our Sept. 8 note). CEO Mary Barra said on the earnings call that talks continue, but given Nikola’s stock price decline since the deal’s announcement, the $4 billion of value GM originally targeted over six years is not likely, in our view. Other developments announced are that GM has a tentative deal with the Unifor union in Canada that will mean GM investing about CAD 1 billion to bring back full-size pickup production to Oshawa, Ontario. Barra also said provided GM’s current recovery pace continues, the firm expects to resume a dividend in mid-2021.