Cramer’s Morning Thoughts: 20 Stocks to Watch

8. General Motors Company (NYSE:GM)

Number of Hedge Fund Investors: 72

General Motors Company (NYSE:GM)’s stock was downgraded to “market perform” by Bernstein after an 85% surge since November 2023. Analysts pointed to concerns about increased capital expenditure needs, which were highlighted during the automaker’s Capital Markets Day. The latest Morning Thoughts post noted that while General Motors Company (NYSE:GM) has seen significant gains, the potential for rising costs could be a key challenge moving forward, prompting caution among investors.

“General Motors stock was downgraded to a hold-equivalent market perform at Bernstein after a 85% run since November 2023. The analysts cited risk of higher capital expenditures requirements announced at the automaker’s Capital Markets Day.”

General Motors Company (NYSE:GM) presents a strong investment case, driven by record-breaking financial results in Q2 2024. General Motors Company (NYSE:GM) posted revenues of $48.0 billion, a 7.2% increase from the previous year, and saw adjusted earnings per share (EPS) surge by 60.2% to $3.06 compared to Q2 2023. General Motors Company (NYSE:GM) also raised its full-year guidance for adjusted earnings before interest and taxes (EBIT) and free cash flow, reflecting its confidence in future growth.

A key factor in General Motors Company (NYSE:GM)’s success has been the strong performance of its internal combustion engine (ICE) vehicles, particularly trucks and SUVs, which contributed to a 37% rise in adjusted EBIT. This non-EV segment continues to drive growth, helping offset the challenges General Motors Company (NYSE:GM) faces in transitioning to electric vehicles (EVs).

However, General Motors Company (NYSE:GM)’s operations in China have posed difficulties, with a $104 million loss from its joint venture, affecting investor sentiment. General Motors Company (NYSE:GM) has also halted its Cruise Origin robotaxi project, signaling strategic hurdles in its autonomous vehicle efforts. Despite these challenges, General Motors Company (NYSE:GM)’s solid core business, increasing profitability, and positive outlook make it a compelling option for investors, especially those focused on growth in its non-EV segments. At the same time, it’s important to acknowledge the risks tied to the EV transition and struggles in international markets.

Diamond Hill Large Cap Strategy stated the following regarding General Motors Company (NYSE:GM) in its first quarter 2024 investor letter:

“Other top contributors included Allstate, Caterpillar and General Motors Company (NYSE:GM). Automobile manufacturer General Motors continues capitalizing on the shift to electric vehicles (EVs) while maintaining the strength of its core gas-engine truck and SUV business. Though it has experienced some setbacks — such as needing to roll back its Cruise driverless car project — we believe the company remains well-positioned relative to secular tailwinds within the automobile business.”