GM Has Potential To Trade At Multiples Similar To Tesla, Wedbush Says As It Initiates Coverage With 'Outperform' Rating

General Motors Co GM’s sharp focus on the switch to electric vehicle rollout is being noticed by Wall Street investors and the Detroit-based legacy automaker could trade at multiples similar to Tesla Inc. TSLA and other pure-play EV rivals, according to Wedbush.

The GM Analyst: Wedbush analyst Daniel Ives has initiated coverage for General Motors with an Outperform rating and a price target of $85.

The GM Thesis: Ives, who has been a long-time Tesla bull, believes 2021 serves as an inflection point for the legacy automaker as it charts a complete shift towards an electric future and has the potential to double its market cap by the end of 2022.

GM has lined up at least 20 new electric vehicle launches within the next two years and 30 in the next three. 

“We believe as GM proves out its EV vision over the coming years the stock will be re-rated more as a disruptive technology and EV play, rather than its traditional auto valuation,” Ives wrote in a research note.

The automaker, known for its big trucks and sports utility vehicles, has set a tighter deadline and plans to spend $35 billion through 2025 to accelerate the switch to electric vehicles. GM aims to have 40% of its U.S. portfolio be battery electric vehicles by the end of 2025 and plans for EVs to account for 100% of sales by 2035.

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Why It Matters: GM is not alone as other legacy players such as Ford Motor Co F, and Volkswagen Ag VWAGY are also setting aside more investments towards the EV switch at a time pure-play EV startups such as Nio Inc NIO, Xpeng Inc XPEV, Li Auto LI, Rivian, and Lucid Motors charge through.

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Tesla, which sells a small portion of the total automobile sales in the U.S., has a market cap of $629 billion, dwarfing those of GM, with a market cap of $81.3 billion and Ford at $55.13 billion.

As per Ives, EVs currently only represent 3% of autos globally and are poised to hit 10% by 2025 and over 20% by 2030. 

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With Mary Barra in charge as CEO and the automaker "developing game-changing battery technology under the Ultium Platform," GM is in a "great position to take advantage of a $5 trillion market emerging over the next decade," Ives said.

Price Action: GM shares closed 0.94% lower at $56.06 on Thursday.

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Photo: Courtesy of General Motors