Wrong Time to Buy General Motors

General Motors Co. (GM) is testing two-week support in the low 50s nearly one week after beating Q4 earnings estimates by $0.20 per-share, missing revenue expectations, and posting inline fiscal year 2022 guidance. Quarterly revenue fell 10.5% year-over-year to $33.58 billion, more than $600 million under consensus. The world’s third largest auto manufacturer reported strong demand for electric vehicles, with excellent reception for the new GMC HUMMER EV pick-up.

Supply Disruptions Coming to an End?

GM sees the light at the end of the tunnel of supply chain disruptions, expecting normal conditions to return in the second half of this year. Many folks are withholding purchases of new vehicles due to skyrocketing prices and it’s hoped that greater supply will sharply increase inventories, allowing the company to slash prices or provide new cash incentives. However, demand has probably eased in the last year, with rising inflation and the end of government stimulus cutting into consumer buying power.

CEO Mary Barra pounded the tables last week during a CNBC interview, noting that General Motors has seen a 25 – 30% improvement in semiconductor supply. She believes that supplies will be “back to normal” by the “second half of the year”, but that’s exactly what manufacturers were predicting a year ago at this time. She also revealed the company is prepared to offer more affordable electric vehicles but provided few details on pricing.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Buy’ rating based upon 16 ‘Buy’, 3 ‘Overweight’, and 4 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $53 to a Street-high $100 while the stock is set to open Monday’s session nearly $2 below the low target. This disconnect with Main Street highlights skepticism about supply chain disruptions and the ramp-up in electric vehicle production.

General Motors mounted 2017 resistance in the mid-40s in January 2021 and surged into the mid-60s in April. Three breakout attempts into January 2022 failed, giving way to aggressive selling pressure that dropped the stock to a five-month low about two weeks ago. Accumulation has now fallen to the lowest low since August 2020, when GM was trading in the mid-20s. Taken together with bearish monthly signals, the stock could now test long-term support at the 2021 breakout level.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.