Share prices of General Motors could double in the next two years, said Christopher Susanin of Levin Capital Strategies, a New York-based investment management firm.
“We think there’s about $30 of hidden value that [is] mispriced in the stock across three buckets, each worth about $10 a share,” Susanin said Friday on “Closing Bell.”
The three areas of growth include changes to the company’s portfolio, such as exiting the European and some Asian markets, new ventures with the Cadillac company and added profits from adjacent businesses.
“They are about to restructure the Korea business altogether,” said Susanin, senior securities analyst at the firm. “Those moves, we think, add a couple billion, two and a half billion [dollars] to profit and are worth a little bit more than 10 bucks a share.”
He said Cadillac, owned by parent company General Motors, also has initiatives in place to double sales and profits.
“We think that could add almost a dollar a share, maybe 75 cents of earnings that are worth almost another $10 of share that are not properly priced in the stock,” Susanin said.
Lastly, adjacent businesses, including OnStar, GM Financial and the company’s aftermarket business, could add between $1.5 billion and $2 billion in profit over the next few years.
“That’s another 10 bucks a share,” said the analyst.
Shares of General Motors were trading around $43 on Friday. But Susanin said it’s worth closer to $75. New investments in self-driving vehicles will also help drive the stock higher.
On Thursday, General Motors announced that SoftBank Vision Fund plans to invest $2.25 billion in GM Cruise Holdings, helping boost the company’s stake in autonomous vehicles. Shares surged about 11 percent after the announcement.
“This is a very big deal,” Susanin said.
He said the company’s market cap — currently close to $61 billion — will only continue to expand after GM launches a commercialized autonomous ride share, if the company can maintain lower prices than competitors such as Uber. GM said it will have the necessary capital to reach commercialization at scale in 2019.
But investors have known about many of the strategies employed in GM’s base business for some time, said Jamie Albertine, managing partner and automotive analyst at Consumer Edge Research, a research firm. And they likely won’t move the market.
“On the pullout of GM Europe, we’ve known that for some time,” Albertine said on “Closing Bell” Friday.
He also pointed out that GM is overexposed in its car business in the United States and that the trucking business isn’t growing that much.
“GM probably is in the best position of its OEM peers right now,” Albertine said, referring to companies with goods used as parts in other company’s products.
“But to see it double in two years, we think it’s low probability,” he said. “It’ll take more like five to seven years for this to play out, in our view.”
