General Motors Inc. (GM) shares are trading down after management’s remarks about its autonomous-driving ambitions on Thursday were followed by worse-than-expected November sales results posted Friday. A leading Barclays' analyst says investors are missing the long-term picture, where GM could have a clear market leadership position in autonomous ride-sharing and electric power over industry pioneer Tesla Inc. (TSLA)

On Friday, Barclays' Brian Johnson issued a research note suggesting that the Street is largely underestimating GM’s goals for autonomous driving and its fleet taxi business. Johnson increased his price target to $57 from $55, indicating a 33.4% upside from Friday afternoon and just below Citigroup’s Street high of $60.  

Stock Due for Valuation Review

The analyst wrote that while many on the Street “view GM’s target of commercially launching at scale autonomous ride-sharing in dense urban environments in 2019 as an unrealistic target,” he is confident in management’s timetable. Under its new ride-sharing program, the automaker plans to collect revenues from its vehicles on an ongoing basis, turning it into a taxi-like business with each vehicle generating hundreds of thousands of dollars. Johnson highlights GM’s transaction price for November at $37,000, up $1,400 over the same period last year and a new record high. Just $100,000 per car from the new business would nearly triple that return.

Ultimately, GM has first-mover advantage and the stock is due for a valuation re-rating, wrote Johnson. About a month ago, the Barclays analyst lifted his rating on GM shares to overweight from neutral, indicating that the firm is likely to regain ground lost to Tesla in the electric and self-driving vehicle segments.

'Dinosaur' Hunting

“With GM making significant progress on electrification and autonomy, just as Tesla faces issues ramping production, we expect that narrative to shift towards our view that GM may not be the ‘dinosaur’ that its low multiple would imply,” said Johnson. Barclays maintains the view that due to GM’s progress and Tesla’s production challenges, more of Tesla’s market cap needs to go back to GM.

Trading down 0.8% on Friday afternoon at $42.72, GM reflects a 22.5% gain year-to-date (YTD). Tesla stock is also lagging 0.6% at $307.18, an increase of 43.7% over the same period. By comparison the S&P 500 has grown 17.8% this year. (See also: Tesla Sales to Beat $60B Within Decade: Nomura.)

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