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General Motors (GM) stock falls to yearly low on coronavirus

Shares of General Motors Company (NYSE: GM) dropped over 16% to a yearly low of $32.79 on Monday on the fears of coronavirus outbreak. The auto industry remained concerned about the impact of coronavirus in the global economy and the supply chain as cases spiral up in South Korea and Italy.

Also, auto deliveries in China are expected to fall 70% in February and 40% for the first two months of the year as the outbreak turned the industry to a near-standstill. Meanwhile, auto experts in China and worldwide expect the deliveries to show improvement in the last week.

GM Chevrolet car
Courtesy: NeONBRAND on Unsplash

Automakers were struggling to restart manufacturing in China as the outbreak had prevented the operations to run as planned. This has impacted the automakers who faced supply-chain issues such as lack of parts. A week ago, GM confirmed that it does not anticipate any impact on full-size truck production as it is closely monitoring the supply chain issues.

General Motors also faces supply-chain issues related to electric vehicles as the company has committed to an all-electric future. This is likely to delay the production of electric vehicles. Also, the delay could postpone the company’s plan in autonomous technology, which lead to a future of zero crashes, zero emissions, and zero congestion.

The company’s business is highly dependent upon global automobile market sales volume, which can be volatile. While not predicting future economic and market conditions with certainty, the company expects US and Chinese industry sales volumes to be lower in 2020 relative to 2019.

In particular, if the current novel coronavirus outbreak continues and results in a prolonged period of travel, commercial and other similar restrictions, General Motors could experience global supply disruptions. Meanwhile, China’s authorities will draw up and promote the policies that help further stabilize automobile consumption.

Read: Ford Q4 earnings review

For the fourth quarter, General Motors posted better-than-expected earnings while revenues missed the mark. The company’s market share in the US decreased year-over-year mainly due to the US labor disruption and discontinuation of some passenger cars. For fiscal 2020, GM expects both GAAP and adjusted EPS to come in the range of $5.75-6.25.

The stock, which has been trading between $32.79 and $41.90 in the past year, is below the 50-day moving average of $34.65 and the 200-day moving average of $36.32. The shares look like a good buy but it may be undervalued given its future earnings forecast.

Listen to on-demand earnings calls and hear how management responds to analysts’ questions

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