General Motors (GM) stock price has suffered a harsh reversal this week as concerns about tariffs remained. It has dropped to $54.80, down by 10.80% from its highest point this week, meaning that it has moved into a technical correction. It has risen by 110% from its lowest point last year.
Tariff concerns remain
General Motors and other automakers like Ford and Stellantis crashed hard as investors remained concerned about Trump’s tariffs. In a statement on Monday, the incoming president warned that he would impose large tariffs on Mexican and Canadian goods.
That was a notable statement because GM is not only one of the top manufacturers in the US but also one of the top importers. It has large operations in Michigan, Texas, Tennessee, and Mexico.
Therefore, a 25% tariff on imports will make its vehicles more expensive in the US, which will hurt its sales in the country. At the same time, Mexico, Canada, and China will also respond by imposing tariffs of their own.
If this plan works, the industry could disrupt the industry at a time when companies are struggling with slow sales.
Still, on the positive side, there are signs that these tariffs will not go on because of the risks involved. For one, high tariffs will be passed to consumers, a move that will lead to higher inflation in the country.
Also, it is unclear whether tariffs on Mexican goods will be legal since it belongs to the USMCA, which Donald Trump negotiated. As such, since the deal was ratified by the US Senate and Congress, it is part of the law and cannot be exited by the executive.
General Motors business is doing well
On the positive side, there are signs that General Motors business is doing well after the company went slow on its EV investments. It will also benefit from the ongoing interest rate cuts in the US and the rising demand for hybrid vehicles.
The most recent financial results showed that GM’s revenue rose from $44.1 billion in the third quarter of 2023 to over $48.7 billion. This happened as the number of vehicle sales and prices continued rising.
GM’s profits also held steady in the last quarter, with the diluted earnings-per-share rising from $2.2 to $2.68. This happened even as the company hiked salaries following last year’s strikes.
It has done that by continuing to cut costs, especially in its EV business and reducing the size of its workforce. Most recently, it announced plans to cut jobs by 1000 in the coming months.
GM has also continued to return funds to its shareholders through dividends and share repurchases. Indeed, its outstanding shares have dropped from 1.4 billion in 2021 to 1.2 billion today.
Analysts expect the General Motor’s revenues will hit $181 billion this year, while its earnings per share will be $10.3, higher than the last year it made $7.68.
GM stock analysis
The weekly chart shows that the General Motors share price has been in a strong bull run in the past few months. It recently jumped to a high of $61.25, its highest level since January 2022.
GM stock has formed a golden cross pattern as the 50-week and 200-week Exponential Moving Averages (EMA). In most periods, this is one of the most bullish patterns in the market.
General Motors has moved to the 23.6% Fibonacci Retracement level. The Relative Strength Index (RSI) has continued rising and is nearing the overbought level.
The stock has formed a bearish engulfing pattern, which is one of the most bearish candlestick signs. Therefore, the stock will likely have some short-term volatility and drop to $50. In the longer term, however, the stock will bounce back and retest $65.63, its highest level in 2022.
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