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GM, Amazon, and Salesforce Strengthen Positions

Plus500 | Thursday 30 November 2023

Three industry powerhouses—General Motors, Amazon, and Salesforce—have recently made impactful strategic and financial decisions to fortify their market positions. While all three have recently been enjoying positive market responses, uncertainties loom as these companies navigate dynamic markets and strive for sustained growth. 

These giants stand at the forefront of their sectors, yet their future trajectories hinge on effectively navigating ongoing changes in their respective industries.

Let's take a closer look at the latest shifts in the American corporate landscape:

an illustration of stock charts on a laptop

General Motors Hits the Gas

General Motors (GM) made significant announcements Wednesday to attract investors by increasing dividends, launching an accelerated $10 billion share buyback, and reinstating its 2023 guidance. The decision followed a labour strike and revised electric vehicle goals.

The company raised its quarterly stock dividend by 33% to 12 cents and introduced a $10 billion accelerated share repurchase program. GM also restored its 2023 guidance, factoring in an estimated $1.1 billion earnings impact due to lost production during the United Auto Workers' strike.

GM had previously increased 2023 earnings guidance twice before retracting it due to the strike's impact. CEO Mary Barra highlighted plans yesterday to counter increased labour costs through a 2024 budget, aiming to offset additional expenses from new labour agreements while reducing business capital intensity and costs.

The stock market responded positively, with GM's stock surging over 9% following the announcement on Wednesday. However, since the beginning of the year, the firm’s stock has dropped 6% in total.

GM price chart since the start of 2023 up until 30 of November

Furthermore, GM's revised 2023 guidance forecasts an EBIT-adjusted range of $11.7 billion-$12.7 billion, adjusted earnings of $7.20-$7.70 per share, and increased adjusted automotive free cash flow of $10.5 billion-$11.5 billion. Capital spending for 2023 is now estimated at $11 billion-$11.5 billion.

Notably, Warren Buffett's Berkshire Hathaway (BRK.B) sold its entire 22 million shares in GM during the third quarter, while analysts project lower profits for GM in 2023 and 2024 due to challenges in the electric vehicle market.

Despite GM's strategic moves to appeal to investors, some analysts foresee profit declines in the coming years as the company contends in the electric vehicle sector. Whether these latter predictions are borne out remains to be seen.

Amazon Looks Ahead

In 2023, the AI landscape saw immense growth, with a focus on generative Artificial Intelligence (AI), prompting Amazon Web Services' CEO, Adam Selipsky, to predict even greater advancements in 2024. Selipsky anticipates more powerful AI models addressing current concerns, such as AI-generated misinformation, citing improvements and reduced "hallucinations" in chatbots like Anthropic's Claude 2.1, a company Amazon (AMZN) invested $4 billion in.

During AWS re: Invent 2023, Selipsky unveiled Amazon's robust AI strategy, highlighting expansions in AI chip lines, collaborations with Nvidia (NVDA), and the introduction of an AI chatbot named Amazon Q. Amazon prioritises responsible AI usage, showcasing tools like Guardrails within Bedrock to avoid problematic content in chatbot responses.

Emphasising adaptability, AWS aims to provide various AI models through partnerships with other industry leaders, from Cohere to Anthropic and Meta (META). This strategy diverges from Microsoft's (MSFT) focus on OpenAI offerings, aiming to provide customers with flexible AI building platforms.

The collaboration with Nvidia brings cloud-based AI supercomputing capabilities and training services beyond one trillion parameters, signifying AWS's commitment to staying agile in a competitive landscape. Selipsky, emphasising customer-centric approaches over incumbents' protectionism, and intends to maintain AWS's dynamic nature.

Selipsky, a veteran at Amazon and former Tableau CEO, sees parallels between tech and wine, acknowledging the patience and time required for these endeavours to bear fruit. Amidst the AI hype, Amazon emphasises a long-term vision, aiming to harness AI's potential while advocating for its responsible use through collaborations and adaptable platforms. So far, this strategy seems to be paying off, with Amazon stock having seen a 74% rise in 2023 to date.

Amazon price chart since the start of 2023 up until 30 of November

Salesforce’s Earnings Surprise

Salesforce (CRM) reported stronger-than-expected third-quarter earnings on Wednesday, November 29, after market close, with net income at $1.22 billion and revenue up 11.2% to $8.72 billion, largely driven by increased cloud-based services adoption ahead of new AI offerings. Despite the company's consolidation of products into a unified cloud-based platform signaling a commitment to AI, a KeyBanc report suggests a lag in AI-related sales growth.

CEO Marc Benioff highlighted Salesforce's position as the third-largest enterprise software firm, emphasising its leadership in AI CRM and enterprise applications. The company aims to integrate CRM, data, AI, and trust into a unified platform for enhanced productivity.

To streamline operations, Salesforce initially downsized its workforce by 10% in 2023 but plans to hire over 3,000 to bolster AI development. Additionally, it intends to offer self-service purchases of tools via Amazon Web Services to cut down sales-related costs.

These developments seem to have borne fruit on the stock market, with Salesforce shares rising 73% so far in 2023. Whether the firm’s momentum will continue on Thursday as stock traders react to yesterday afternoon’s earnings release is as yet unknown. (Souce: Investopedia)

Salesforce price chart since the start of 2023 up until 30 of November

Conclusion

These three industry giants, General Motors, Amazon, and Salesforce, have unveiled significant strategies and financial moves to propel their businesses forward. While these moves have initially seen positive market responses, the future remains uncertain for each company as they navigate evolving landscapes and strive to maintain momentum in their respective sectors.


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