General Motors Co

General Motors Co (NYSE: GM) is one of the world’s largest automobile manufacturers. It primarily caters to three regions: North America, the Asia Pacific, and South America.

Investment Rationale for Valuation – Hold at USD 54.27

• GM would introduce two new commercial vehicles in near future.
• In Q2 FY2021, GM’s revenue surged by ~103.6% YoY.
• On the profitability front, GM’s net margin since Q3 FY2020 has been higher than the industry median of 5.3%.
• From a technical standpoint, 14-day RSI at ~43.13 is close to the oversold zone, indicating a potential uptick in the stock price in the near term.

Key Risks

• The automobile market is highly competitive with autonomous and electric cars providing strong competition to the traditional carmakers.
• China’s recent economic slowdown is a concern for automakers as it is the world’s largest auto market.
• Carbon emission regulations could incur additional costs for the auto companies, affecting their margins.

Financial Highlights (for three months ended 30 June 2021 (Q2 FY2021), as of 4 August 2021)

(Source: Company Website)

• Driven by increased demand for automobiles as the US economy is coming back on track, automotive revenue of GM rose dramatically in Q2 FY2021 by ~130% YoY.
• It resulted in overall revenue growth of ~103.6% YoY in Q2 FY2021.
• The strong performance in top line led to the Company making a profit in Q2 FY2021. It made a net profit of USD 2.78 billion in Q2 FY2021 from a net loss of USD 0.78 billion in Q2 FY2020.
• The solid performance and GM’s cash accretive operations led to cash position rising by ~14.6% from the FY2020 level.

One Year Share Price Chart

(Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

Driven by vaccinations, the US market is gradually coming back on track, and the situation in international locations is also expected to improve. For rest of FY2021, the Company would continue to invest in research and development and innovate new automotive models. It is planning to introduce two new commercial vehicles in near future. With substantial liquidity, the Company is ready for growth and weather any further adverse impacts. The stock made a 52-week low and high of USD 27.15 and USD 64.30, respectively.

Based on the introduction of new models by the Company, its favourable profitability than the industry, resilient demand for automobiles, and support from valuation as done using the above method, we have given a “HOLD” recommendation on General Motors Co at the closing market price of USD 54.27 (as of 11 August 2021), while we would revisit our stand based on further corporate announcements by the Company.

CleanSpark Inc

CleanSpark Inc (NASDAQ: CLSK) is a diversified intelligent energy services and software company.

Investment Highlights – Watch at USD 14.87

• The Company made a loss from operations in Q2 FY2021.
• CLSK is dependent on external funding to run its operation.
• The shutdown of the majority of China’s bitcoin mining capacity could lead to an adverse impact on CLSK’s operations.
• From a technical standpoint, the stock price is sustaining between the upper and middle Bollinger bands. Hence, there could be a correction in the stock price in the near term.

One Year Share Price Chart

(Source: Refinitiv, Analysis done by Kalkine Group)

Conclusion

Based on its loss-making operations and its dependence on external funding, we have given a "WATCH" stance on CleanSpark Inc at the closing market price of USD 14.87 (as of 11 August 2021).

*The reference data in this report has been partly sourced from Refinitiv.

*All forecasted figures and Peer information have been taken from Refinitiv.

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