In 2018, Apple was the first S&P 500 stock to hit a trillion-dollar valuation. Today, Microsoft, Amazon, Alphabet, and Nvidia are also trading at or above this level.
Some strong candidates could soon join this list.
One less obvious name with the potential to do so by 2030 is General Motors (NYSE:GM).
With a market cap of $40bn today, this could be a once-in-a-decade investing opportunity.
Where is General Motors right now?
Right now, General Motors is nowhere near being a trillion-dollar company.
However, it’s still doing quite well.
Third-quarter earnings were released on Tuesday. Revenue of $44.13bn beat the consensus estimate of $43.68bn. Earnings per share (EPS) of $2.28 also beat the consensus estimate of $1.88.
The United Auto Workers (UAW) union strikes that started on 15 September could cause problems, however. The automaker lost $200m a week in vehicle production because of this. The UAW is also planning to expand its strikes to a highly profitable GM plant.
If it doesn’t get a grip on this, GM shares could be very volatile in the short to medium term. For example, they fell by 12.5% over the last month to $28.92.
Still, GM shares are trading at a rock-bottom valuation with a price-to-earnings (P/E) ratio of 4.1 and a price-to-sales (P/S) ratio of 0.2. This is despite sales and earnings continuing to trend upward.
This subsidiary will be a key
I believe the key to General Motors becoming a trillion-dollar company is its 80% holding in Cruise, an autonomous driving company that is specifically focused on ridesharing.
It has already used its technology on GM vehicles, such as the Chevrolet Bolt.
It’s also got new vehicles in its pipeline, such as Origin, which is already in production and testing. This will be like a driverless mini-bus built specifically for ridesharing.
This is similar to Uber but without a driver.
This space also has many growth areas that can be exploited, such as food delivery.
GM CEO Mary Barra has stated that Cruise could generate $50bn of revenue annually by 2030.
Last year, Cruise only operated in San Francisco. It’s now operating in three cities and has roadmaps to operate in a further 15 soon.
Why do I think this can make it worth a trillion dollars?
A main competitor, Tesla, revolutionised the auto industry with its electric vehicles. In late 2021 and early 2022, Tesla breached the $1trn threshold multiple times. It did this on the back of revenue of $53.8bn in 2021.
Cruise growing from nothing today to $50bn in seven years represents insane growth. Using Tesla as an example, it could easily justify the $1trn valuation with similar numbers.
This is without including the $169.7bn revenue GM pulls in without Cruise, which is also expected to grow by 2030.
Now what
For me, the General Motors shares are a great investment in their own right. And I believe Cruise is the ultimate reason GM could be a trillion-dollar company by 2030.
There’s a risk that driverless vehicles don’t take off, which could prevent this from happening. Ultimately though, I believe people will enjoy the convenience it brings.
Tesla changed the way we thought about powering cars. Cruise is a company that could change the way we think about transport altogether.
The post This could be a trillion-dollar S&P 500 stock by 2030 appeared first on The Motley Fool UK.
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Muhammad Cheema has positions in General Motors. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
(The post is shared from syndication feed, it is not edited by Analyzing Market Team.)
