GM stock hit resistance at a key average Wednesday, a day after Ford stock reclaimed that key level for the first time since January.
Still, General Motors and Ford continue to power up ahead of next week's earnings reports for the second quarter, though they trimmed strong early gains Wednesday.
Late Wednesday, Ford announced that it will update investors Thursday on its "plan to lead the electric vehicle revolution." The event starts at 8 a.m. E.T. and will be webcast live. Ford reportedly plans to cut 8,000 jobs in the coming weeks to help finance its EV push.
Both GM and Ford are making a massive shift from internal combustion engine (or ICE) vehicles to electric vehicles. But their more profitable ICE business is part of the reason why a top Wall Street analyst is "incrementally more constructive on both names," despite a host of headwinds.
On Wednesday, EV leader Tesla topped Q2 earnings views. Tesla's outlook for deliveries and cost controls will be key amid the slowly improving chip shortage.
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GM Stock, Ford Stock Rise
Shares of General Motors rose 1% to 34.74 on the stock market today after jumping 5.5% on Tuesday. GM stock hit 35.02 intraday, briefly regaining the 50-day moving average.
Ford stock climbed 1.2% to 12.73 Wednesday. Shares gained 5.3% Tuesday to reclaim the 50-day line for the first time since January.
Tesla stock added 0.8%, after retaking the 50-day line Monday. It eased a fraction in late trade.
Shares of both GM and Ford eye their third straight weekly advances after hitting 52-week lows on July 5. That suggests investor optimism with GM and Ford due to report July 26 and July 27, respectively.
So far this year, the relative strength lines for GM stock and Ford stock are lagging. A falling RS line means a stock is underperforming the S&P 500.
Both GM stock and Ford stock have roughly halved from their January peaks and remain well under their 200-day averages. There's no buy point in sight for now.
The auto giants slumped on various factors. Chief among them: the hit to vehicle production and sales from Covid-fueled chip and supply disruptions. The rapid rise in inflation and interest rates is another, more recent worry.
On Tuesday, the U.S. Senate advanced a bill to boost domestic chipmaking in a bid to outpace China. But it's unclear if that would have any real impact on auto-related chips for years to come.
And on Wednesday, the U.S. Postal Service vowed to buy far more electric delivery vehicles than it previously forecast, refueling hopes for Workhorse Group. Workhorse stock jumped nearly 16%, off very low levels, to 3.63.
GM Earnings, Ford Earnings
Early Tuesday, analysts expect GM's Q2 earnings per share to crumble 35% as revenue falls 0.9%. Late Wednesday, Ford earnings will vault 245% as revenue grows 39%, according to FactSet.
Ford has already disclosed that its Q2 U.S. auto sales grew 1.8%, defying a double-digit slump for most major rivals, including a 15% sales drop for GM.
Market watchers say Ford benefited from higher-than-average vehicle inventory. It suffered more than most in 2021 from the global chip shortage, but that seems to be changing.
In early July, GM disclosed it's holding 95,000 incomplete vehicles, which await certain parts for delivery to dealers. On the other hand, Ford revealed higher dealer stock for new EVs heading into July.
Rally Gains Steam, But Still Missing This; Tesla Leads Earnings Movers
Analyst 'Constructive' On General Motors, Ford
In a July 14 note, Morgan Stanley auto analyst Adam Jonas struck a bearish note on the auto sector.
"We have made material cuts to our earnings forecast, particularly in FY23 to reflect slower sales growth, deteriorating price/mix, and pressures on the auto credit complex," Jonas wrote. But he took a less dim view of General Motors and Ford, citing legacy businesses
Amid the EV transition, the Morgan Stanley analyst and his team believe the market may not be fully valuing GM's and Ford's ICE businesses.
"We think it's time for investors to accept that, while there may be some degree of optionality to the EV market, the direction of forecasts for GM and Ford is very much tied to what remains of the useful life of the ICE product range," Jonas wrote.
He added: "At current share prices, we not only believe the EV 'option' value has been appropriately compressed to near zero Net Present Value ... but the market may also be undervaluing the runoff cash flows of the ICE portfolio which is going too far, in our view."
Jonas expects the ICE decline to extend beyond 2030 and to produce substantial cash flows meantime. He is "incrementally more constructive" on GM stock and Ford stock, remaining equal weight on both.
Proving there's life in the gas business, Ford on July 14 unveiled its newest pickup, the F-150 Raptor R. The $109,145 pickup truck with a V-8 engine delivers 400 horsepower. Just days later, GM unveiled the Chevy Blazer electric SUV, starting at $45,000.
New EVs hold promise for growth. But gas-fueled SUVs and trucks remain the cash cows of today.
