GM shares close higher after RBC says 2018 earnings will top expectations, upgrades stock

Key Points
  • RBC upgrades General Motors shares to outperform.
  • "We believe GM guides 2018 above consensus leading to positive earnings revisions," the firm says.
  • RBC also sees "opportunity for new investors" because of GM's efforts in autonomous drive technology.
General Motors Co. GMC Sierra Denali pickup truck at the Los Angeles Auto Show.
Patrick T. Fallon | Bloomberg | Getty Images

General Motors shares rose Tuesday after RBC Capital Markets upgraded the stock to outperform.

"We believe GM guides 2018 above consensus leading to positive earnings revisions," wrote analyst Joseph Spak. "The stock fits squarely into our preferred narrative for 2018 — increased confidence on downturn resiliency with a seat at the table on new mobility."

His new price target of $52 calls for the stock to pop 23 percent over the next 12 months as North American truck sales decline less than the rest of Wall Street expects.

The analyst revised his 2018 earnings per share estimate to $6.30, approximately 8 percent above consensus, according to FactSet.

Shares of GM closed up 0.8 percent Tuesday, adding to a 22 percent gain this year.

But while Spak's primary reason for upgrading shares stemmed from his belief in healthier truck production and a more resilient company, the analyst did note that General Motors could be a player in the budding robo-taxi industry. The company is investing heavily in autonomous vehicle technology, a potentially "game changing paradigm shift" for GM.

"We believe autonomous will first permeate in urban areas where the cost/mile is very high which is likely why GM is testing in those locations. Interestingly, GM is typically under-represented in urban areas so the cannibalization of itself is lower and shared autonomous looks to be an incremental opportunity for GM," wrote Spak. "Only time will tell whether we and/or GM are right on the opportunity. But from a stock perspective, because GM has a seat at the table, we see an opportunity for new investors."

In the company's recent earnings call, CEO Mary Barra noted that GM is working on the feasibility of autonomous driving and the company's new ride-sharing platform known as Cruise.

"We're exploring many options and we could partner with someone, partner with many or work on our own, the Cruise application that is being used with our employees," she said.

CNBC's Michael Bloom contributed to this report.