Why General Motors Stock Is Down By 3% Today

General Motors Stock Declines As Company Expands Chevrolet Bolt EV Recall

Shares of General Motors remain under pressure after the company stated that it would expand the recall of its Chevrolet Bolt electric vehicles due to the risk of fire from the battery pack. This recall would cost as much as $1 billion. The previous recall costed $800 million, so battery-related problems are projected to cost $1.8 billion.

General Motors stock gained downside momentum at the start of this month after the company’s earnings guidance missed analyst estimates. The new $1 billion blow has already put material pressure on the company’s shares, and the market will likely remain focused on the EV recall and global chip shortage in the upcoming weeks.

What’s Next For General Motors Stock?

Analyst estimates have trended down in recent weeks, which is not surprising as the company has reduced its adjusted earnings guidance to $5.40 – $6.40 per share for the full year 2021. Currently, analyst consensus calls for earnings of $6.33 per share in 2021 which is close to the high end of the company’s guidance, but it is clear that earnings estimates will continue to decline.

In 2022, General Motors is projected to report earnings of $6.93 per share, so the stock is trading at forward P/E of less than 7. However, earnings estimates may move lower in the upcoming weeks, which is often bearish for a stock.

At this point, General Motors stock needs upside catalysts to break the current downside trend. Otherwise, the market will remain focused on the company’s problems with the battery pack and the global ship shortage which hurts all automakers.

It remains to be seen whether value-oriented investors will be ready to increase purchases of General Motors stock after the recent pullback. Current valuation levels look cheap but earnings estimates may move lower, and the stock needs additional positive catalysts to gain upside momentum.

For a look at all of today’s economic events, check out our economic calendar.