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Goldman Sachs Is Right to Recommend General Motors Over Tesla

Last Updated September 23, 2020 2:31 PM
Simon Chandler
Last Updated September 23, 2020 2:31 PM
  • Goldman Sachs has recommended GM as a stock to buy in the auto-tech sector while leaving Tesla off the list.
  • It makes sense to recommend General Motors over Tesla since recent acquisitions have strengthened GM’s bid to muscle in on the EV market.
  • GM’s dominant position in the U.S. auto industry gives it the perfect platform to dominate the American electric car market.

Goldman Sachs has flagged General Motors (GM) as a stock to buy in the automotive technology sector, among four lesser-known firms. Analyst Mark Delaney says recent partnerships and acquisitions mean GM is well-placed to expand its market share in electric vehicles.

Tesla wasn’t included in Goldman’s list of auto-tech stocks worth buying, so the inclusion of GM may come as a surprise to more casual observers. But it shouldn’t since GM owns a large share of the U.S. auto market, which gives it a strong platform to dominate electric-vehicle sales.

Goldman Rates General Motors a ‘Buy’

According to Goldman analyst Delaney , GM is positioning itself well to play a leading role in the transition to electric vehicles and higher-tech cars:

GM has a majority stake in Cruise (AV technology), and GM is increasingly active in announcing new partnerships in the EV space both with its Ultium battery platform and in the EV space more broadly.

GM has continued this trend of strategic EV maneuvers with its purchase of an 11% stake in Nikola. The partnership will strengthen GM’s ability to test its EV technology in Nikola vehicles.

Goldman Sachs has taken such factors into account in giving General Motors a $36 share price target. GM currently stands at around $30, having gained 9% over the past 30 days.

General Motors stock price Goldman Sachs auto-tech rating
GM has had a good month, although it’s still down nearly 17% year-to-date. | Source: Yahoo! 

Goldman isn’t so bullish on Tesla, which didn’t make its list. Delaney rates Tesla stock as a ‘Hold ‘ and has set a price target of $295–22% lower than Tesla’s closing price on Friday.

Tesla stock
Tesla has had a rocky month. | Source: Yahoo! 

Other Reasons to Be Bullish

Goldman’s four other picks remain relatively obscure. They include New England-based EV firm Sensata, which Delaney has given a $56 target, compared to a $42 close on Friday. They also include TE Connectivity, which manufactures automotive connectors and has a $108 price target from Goldman compared with $97.83 on Friday.

The other two companies are Aptiv and Amphenol, which are both involved in manufacturing connectors. Delaney has targets for them of $94 and $116, respectively, compared to $84.55 and $104.29 on Friday.

These stocks may not have received widespread attention, but it does seem that other analysts and institutions are paying more attention to GM and its growing involvement in EV tech.

RBC analyst Joseph Spak raised his GM target to $44 , with a best-case scenario of $70. Barclays raised its GM target to $39 last week , while Morgan Stanley analyst Adam Jonas suggested GM could potentially rise as high as $59 .

GM price target tweet
CNBC journalist Phil LeBeau tweets that JPMorgan has raised its target for GM. | Source: Twitter 

There’s good reason to believe GM’s stock will rise and that it will give Tesla a run for its money. Not only has it bought stakes in EV companies and formed strategic partnerships, but it’s the most well-known car brand in the U.S. It has the biggest share of the U.S. car market  and has had the biggest share for every year since 1961 .

General Motors GM market share Goldman Sachs Buy rating
GM’s share of the U.S. auto market was 17.85% through Q2 2020. | Source: Statista 

GM will likely use this dominant position to reach a broader market for its EV vehicles–at least when compared to Tesla, which is barely a drop in the ocean of overall auto sales.

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. Unless otherwise noted, the author has no position in any of the securities mentioned.