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Why General Motors Stock Stomped on the Gas Today

By Rich Smith – Oct 7, 2021 at 4:48PM

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GM promises to double sales and boost profit margins in under 10 years.

What happened

General Motors (GM -1.31%) stock put the pedal to the metal this morning and hasn't let up on the gas since. As the trading day winds down, at 3:40 p.m. EDT, GM stock remains up a solid 4.8%.

It's no mystery why.

Lights streak down a red electric car racing down the highway.

Image source: Getty Images.

So what

General Motors laid out an ambitious and "detailed roadmap" of the future yesterday afternoon, explaining how it "plans to double its annual revenue and expand margins to 12 to 14 percent by 2030" by focusing on the production of electric cars and trucks, the mainstreaming of autonomous vehicles, and the provision of new services such as EV charging.  

"GM has changed the world before and we're doing it again," said GM Chair and CEO Mary Barra. 

Of course, lots of companies promise to change the world. Few lay out quite such detailed numbers -- as GM has just done -- predicting what that change will look like. According to the company, by the end of this decade GM should be averaging $280 billion in annual sales, up from $140 billion currently.

Much of this revenue will come from selling cars, and in particular, electric cars. From $10 billion in EV sales projected for next year, GM plans to grow this business 9 times through 2030, to $90 billion in annual sales. And yet, Barra predicts that "software and new businesses" such as the Cruise autonomous vehicle service will grow even faster -- "nearly 50 percent CAGR through 2030."

At least as important as the sales gains is the company's plan to improve operating profit margins -- already quite respectable at 11% -- to 12% to 14%.

Now what

Perhaps you think GM's sales projections seem a bit far-fetched? And yet, the company is only promising a modest one to three percent in operating margin improvement.

This combination of aggressive targets on the top line with very realistic, achievable targets on profits suggests that the company has in fact thought long and hard about what is achievable here. It lends an air of gravitas and reliability to the plan as a whole.

GM investors seem excited about the plan today, and I cannot say I blame them.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

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