Unlock: General Motors (GM) – Bullish View on SAAR and Manheim Index
It pays to do fundamental research. Here is bullish view we presented to clients on October 5. Subsequently between October 6 and 27 institutions accumulated over $8.3 million worth of call options. Stock off to races since. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE
October 25, 2016
General Motors (GM) – Strong quarter, highlights:
– Q3 EPS $1.72 vs. $1.44 estimate, big beat
– Q3 Reveues $42.8B vs. $39.3B estimate, big beat
– Q3 Net Income +104% YoY
– Q3 EBITDA +14.4% YoY
– Q3 EBITDA Margin 8.3% vs. 8% estimate, beat
– Q3 Free Cash Flow improved drastically to $3.5 billion
October 5, 2016
General Motors (GM) – Keep an eye on this chart Jags! Much better looking chart than Ford. As recorded in Activity Tracker, recall back on August 4 we saw massive buyer of 20,000 Jan’17 30-strike calls for $4.00. Huge $8 million bullish bet that remains in open interest and these calls haven’t performed yet. But stock is finally attempting to breakout here after building a large base.
As a reminder, US SAAR came out very strong yesterday as I discussed under Ferrari (RACE). Additionally, note GM increased its market share in August, rising from 11.2% to 13.6%. Further, I believe the most important data point in monthly SAAR report was auto inventories down sharply since May. Still above 5-year average, but down from 10.5% above 5-year average to now 6%. This is encouraging considering the sales decline in the month, and suggests to me that the automakers, in aggregate, remain disciplined on producing to match demand. Putting this altogether, rising SAAR and falling inventory just before holiday season should suggest better margins, less need for aggressive promotions and more importantly an easy view to hit or even exceed Wall Street consensus view of 17.4 million SAAR. Add further to this analysis, a second source, Manheim Used Vehicle Value Index is breaking out to new all time high. Use car pricing has been soft for nearly 5 straight years. Now creeping higher.
A lot to like here in autos in past few weeks. Bodes well for GM and Ford.
