General Motors Corporation (GM) is a company that designs, constructs and sells automobile parts around the globe. GM also provides financing services for the automotive industry through the General Motors Financial Company. The stock is currently trading at $36.86 per share with a 52-week range between $18.72-$36.99. On the year General Motors is up 27.82% and over a 12-month period the stock is up 90.34%.
EARNINGS ON JULY 25
The second quarter report from GM is expected to state an EPS of $0.81 on revenue of $38.37 billion. When comparing this to last year’s report, revenue is up by $770 million. The upcoming announcement is on July 25, 2013.
When reviewing the company’s sales for the month of June, General Motors announced a sales increase of 10.6%, which was above the 5.8% expectation for the company. One section of the market where GM found success was in the large pickup portion of the auto industry. The company was up 29% in this section and was in control of 37.4% of that specific market. With an improved vision from CEO Dan Akerson, the company has been able to turn around its portfolio and find success as they continue to move forward.
Throughout the last year General Motors sold 4.85 million vehicles around the world, which is a 3.9% increase from the prior year. Most of the auto sales were in North America and China, which is where the company has seen the greatest amount of success. However, this success was used to offset the struggles they faced with distribution in Europe and South America. In other news, the recent economic data concerning the QE tapering and the effects it might have on the automotive industry have been proven uneventful. The sale of automobiles has remained strong and consumers are likely to keep up demand as long as the economy remains stable and new product offerings stay consistent.
With General Motors hoping to grow through the innovation and efficiency of vehicles, they are betting on electric automobiles to propel the company forward. However, this portion of the market has lower profit margins than traditional cars such as SUV’s and light trucks, which is a main concern for GM as they hope to make this a larger segment of their company. One of the main motives for the change in General Motor’s platform is Tesla Motors new line of electric cars that have been performing well.
General Motors has actually sold off 5 of the last eight quarters, but after hitting a 52-week high I think that GM has more upside potential, but I always want to define my risk vs. reward. I look at the At-the-Money Straddle for an implication of how much the stock can move. The General Motors Weekly Straddle is priced at $1.50, so the market makers are implying the stock can move to either $35.50 or $38.50.
MY TRADE
Buying the GM Weekly 37-38 Bull Call Spread for $.35 debit My Risk: $35 per 1 lot Reward: $65 per 1 lot
