What happened
Shares of General Motors (GM +4.19%) lost 17.1% of their value in December, as the automaker was dogged by headlines that up-ended what had looked like a budding stock price recovery after last year's rout.
So what
Don't look for a proverbial smoking gun -- you won't find it. Rather, GM is the victim of several issues that call its outlook for the foreseeable future into question.
Wedbush analyst Dan Ives called attention to one of those issues early in December when he pointed out how China's continued COVID-19 lockdowns were not only making it tough for GM and its partners to get much manufacturing done there, but crimping demand in that market as well.
In mid-December, General Motors announced the recall of 850,00 trucks and SUVs to repair potentially misfunctioning headlights. Although vehicle recalls aren't particularly unusual, and this one is not related to an especially serious (read "expensive") problem, there is both a financial and a reputational cost to them.
NYSE: GM
Key Data Points
The public also learned last month that GM's autonomous driving system is now the subject of a National Highway Traffic Safety Administration probe following two separate, injury-causing collisions involving cars using the technology. The incidents don't inherently mean the system is flawed, although that is a possible finding that could ultimately require another recall.
Finally, General Motors is now being scrutinized by the U.S. Senate for its potential use of components supplied by companies using forced labor in China's Xinjiang region.
Separately, none of these issues translates into severe trouble for GM. Combined, though, they are creating a great deal of trouble for a stock that was already vulnerable to profit-taking. Shares started December on a bullish foot, riding November's rebound from the first half's steep sell-off. But investors just aren't sure the economic rebound that would be needed to reignite the automobile business in 2023 is a foregone conclusion.
Now what
Investors may not be convinced, but General Motors CEO Mary Barra is. She expects sales of cars and light trucks in the United States to reach 15 million this year, up from last year's likely tally of around 13.7 million. In this vein, analysts expect GM's 2023 top line to grow just under 4%.
It's still going to be a challenging year, however. With material and labor costs still elevated at a time when economic headwinds are blowing (and a recession remains a distinct possibility), analysts believe GM's earnings per share will slip from $7.19 in 2022 to $5.97 in 2023, despite projected revenue growth. That's not exactly the stuff of bullish inspiration.
On the other hand, if you're a true believer in General Motors' long-term, EV-centric future, it's worth noting that shares are priced at a mere 6 times this year's expected earnings. That's cheap even by modern automobile stock standards.
