SAN FRANCISCO – Someone forgot to tell General Motors Corp. (GM) this week that it's a stodgy member of the Dow industrials on the brink of extinction at the hands of fierce overseas rivals and its own archaic business model.
In fact, GM shares are looking a lot more like an Internet stock circa 1999, having added almost half their value so far this year — and are up almost 20 percent this past week alone.
The automaker also has seen a huge groundswell in interest, with volume in the prior two sessions easily doubling the daily average of 13 million.
Could this be the beginning of the struggling Detroit icon's return to prominence, or merely one step closer to the cliff's edge?
Don't look to Wall Street for a consensus.
Price targets range from $10 a share from Bank of America equities analyst Ron Tadross all the way up to $37 for Merrill Lynch's John Murphy. With targets from the other nine analysts covering the stock scattered everywhere in between, the median is $23 a share, according to Thomson First Call.
The stock kicked off the year at $19.12 and last checked in at $29.50, trouncing the nearly 5 percent run for the Dow industrials since January. This from the worst performing component in the benchmark index over the past 10 years.
GM has lost almost half its value since 1996, while Coca-Cola Co. (KO), off just slightly, is the only other Dow issue in the red over that period of time.
Burnham Securities analyst David Healy aptly described trading in GM stock as "totally psychotic in both directions these days." Clearly, investors looking to jump in better check their stomach; its bound to be a wild ride, at least relative to historical norms.
Over the last three months, GM's price action has been 5.5 times more volatile than the blue-chip index, according to Schaeffer's Investment Research. To put that in context, since 1970, the stock has only averaged 1.9 times the volatility of the Dow Jones Industrial Average.
Analyst Chris Johnson at Schaeffer's said that GM's current volatility is among the highest in its history.
Merrill's Murphy still sees some legs left to the recent rally, and his upbeat commentary earlier this week was the latest catalyst to drive GM higher. He pinned his stock upgrade to a better than expected amount of hourly workers taking buyout packages.
However, Murphy is in the minority as most price targets on Wall Street are below the stock's current level. Patrick Welch from Wall Street Strategies holds a $25 target on GM, and while there's been plenty of good news lately, he said he sees clouds forming.
"What we're seeing now is the complete opposite of the perfect storm GM went through last year," he said. "Chief Executive Rick Wagoner finally has some of the pieces fitting together."
Welch added that he believes the stock may cruise up to $32 in the near term, but that he's expecting some "strong pullbacks" on Delphi news for the remainder of the year.
A strike at the bankrupt supplier could have a devastating impact on GM's assembly lines and would surely trigger an exodus from the stock. Then again, if restructuring efforts continue to go smoothly and GM can somehow stem losses in its North American auto business, the rally could very well be in its early stages.
In other words, get used to it. The bumpy road for GM shareholders doesn't look to be smoothing out anytime soon.
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