2024 GMC Hummer E-V SUV. GMC
According to Wedbush, General Motors will transition to a software subscription model that is profitable over the next 10 years under its 10-year plan.
In a Monday note, the research firm stated that recurring revenue from its Software business would drive 46% upside for GM stock.
Wedbush stated that the software and services businesses attached to the EV Shif represent a potential goldmine for the company.
Subscribe to our daily newsletter 10 Things Before The Opening Bell.
According to Wedbush's Monday note, General Motors will capitalize on its move to electric vehicles by selling value-added software which will allow autonomous driving capabilities.
This should drive General Motors stock price to record highs. Wedbush backs its "outperform", rating, and $85 price target. That represents potential upside of 46% compared to Monday's close.
Daniel Ives, a Wedbush analyst, said that General Motors' 10-year aggressive growth plan was "clear" and "attainable." According to General Motors, it plans to double its revenue to $140 billion to $280 million by 2030.
This growth will be driven partly by a subscription to software for vehicles that would enable autonomous or assisted driving capabilities. Ives estimates that General Motors will generate $2,000 per year in recurring revenue from its software offerings.
Ives stated that the software and services business associated with the EV Shift represents a potential goldmine for the company and could bring in $20 billion to $30 trillion of incremental services and software revenue over the next five to seven years.
According to Ives, General Motors will be able to increase its software subscription prices over the next decade as autonomous driving becomes more popular. Through its 2016 acquisition, Cruise, General Motors has been working on its own autonomous driving technology.
Although the subscription model for autonomous driving software by General Motors is still in development, it is crucial that the stock price rises with a Wall Street re-rating. This will depend on whether the automaker can convert its existing vehicles to electric.
Ives stated that "the Street remains skeptical" and that the Chevy Bolt fiasco, as well as the chip shortage, have cast a shadow over the stock and kept many investors away. According to Ives, the automaker has the potential to change the narrative and position itself to profit from a "golden opportunity".
General Motors will convert 20% to electric vehicles by 2026 according to Ives, and 50% by 2030 according to Ives. This EV base will drive a surge in software growth for the 113-year-old company.
General Motors shares rose 1% on Tuesday, and are up around 40% year to date.