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GM: Investor Sentiment - The Last Piece Of The Puzzle On The Road To $40+

Introduction

It's no secret: I'm very bullish on General Motors (GM) this year and argued in December that the stock could trade as high as $45 this year on the back of $4+ in EPS. GM's recent earnings blowout has only strengthened my conviction in this prediction.

In this article, I discuss what I believe to be the final piece of the puzzle in getting GM over the $40 hump--and that's investor sentiment (also known as "multiple expansion" for those who prefer the euphemism). In a nutshell, investor sentiment is how the investment community feels about a certain stock, and more specifically, the certainty of their earnings. Investors rationally pay higher multiples for companies with more predictable, stable (or likely to grow) earnings, and pay lower multiples when those are earnings are uncertain and volatile (or likely to shrink). Even with the most recent move up, GM trades somewhere around… Read More …