Are the GM Bulls Waking Up?
At $27.66 per share, General Motors Company (NYSE:GM) is bumping along less than a dollar shy of its 52-week high of $27.91. The big news that came in the middle of last week was a $5.5 billion buy-back of 200 million shares from the U.S. Department of the Treasury at $27.50 per share, coupled with the government’s announcement to fully exit its entire holding of GM stock within 12 to 15 months.
Following the news, Goldman Sachs revealed that, pending completion of the buy back, it would reinstate coverage of GM at a “Buy” with a $35 price target, a 27.27 percent upside on the government’s sale price.
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Led by margin growth in North America and Brazil, the firm expects EBITDA to increase 17 percent next year. After the buy back, Goldman will raise its 2013 EPS estimate by 11 percent to $4.49, way above the current Wall Street consensus of $3.82. Goldman will also raise its 2014 EPS estimate 10 percent to $5.36, also above the Wall Street consensus of $4.81.
The Goldman target of $35 per share may seem high, but there is some precedence for the call. Shares of GM have grown over 29 percent this year to date, despite having suffered tremendous selling pressure over the summer. At a comparable rate, by this time next year the analysts at Goldman will realize their target.
Shares are up more than 10 percent over the past five trading days because of the news that the government will be selling off its stake. As of the close on December 21, the stock is trading 7.74 percent above its 20-day simple moving average, or SMA; 9.92 percent above its 50-day SMA, and 19.63 percent above its 200-day SMA…