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GM wants to replicate Denali money machine with expanded AT4 off-road lineup

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GM plans to expand an off-road sub-brand called AT4 across its vehicle lineup in 2020.

GM

DETROIT – General Motors wants to replicate the success of its “money machine” Denali lineup of pickups and SUVs to boost profits as auto sales slow and competition in the lucrative truck market increases.

The Detroit automaker is expanding its AT4 off-road performance package offered on some trucks and SUVs to its entire vehicle lineup in 2020 as a sub-brand, like Denali has become. Launched on its redesigned Sierra pickups beginning in late 2018, the AT4 performance package will be offered on new models of its highly profitable Yukon SUVs that are scheduled to be unveiled Tuesday night.

GM is hoping its expanded AT4 line, along with Denali, will become a double-pronged profit center for the automaker’s GMC truck and SUV division. Denali pickups and SUVs, GMC’s luxury line, commanded an average price of about $56,000 per vehicle last year – higher than luxury brands such as Mercedes-Benz, Jaguar and BMW.

The Sierra AT4 pickups are selling at average transaction prices that are thousands of dollars higher than its segment and roughly $2,000-$3,000 under Denali. Sales of AT4 models for the Sierra have exceeded internal expectations by 50% without taking away from Denali’s sales, according to Duncan Aldred, global head of GMC.

“AT4 is premium off-road. It’s designed to be up there right with Denali,” Aldred told CNBC during a phone interview. “I think it’s going to be a real success.”

That success is expected to assist the automaker in funding its plans for autonomous and all-electric vehicles, including a new electric Hummer pickup as part of its plans to release at least 20 new EVs globally by 2023.

AT4 vs. Denali

AT4 models feature all-wheel-drive, darker exterior accents and some additional off-road capabilities and features. That compares to Denali models, which represented 30% of sales in 2019, that include additional chrome and more luxurious features and amenities.

GMC on Monday introduced AT4 on the Canyon pickup as part of a refresh of the midsize pickup for the 2021 model-year. The vehicle features a new larger grille design, 17-inch off-road tires as well as an off-road tuned suspension and skid plate under the vehicle for additional protection.

While AT4 models are currently selling for less than Denali versions, Aldred said that might not be the case in the future as the company expands the new sub-brand.

“We don’t know where the ceiling is for AT4 either on volume or average transaction price,” he said. “It’s exceeding expectations so far and we’ll see where it goes but we’ve certainly seen enough so far that we will continue to invest in it, and develop it and enhance it going forward.”

Expanding AT4 as it did with Denali is a “smart move” for GMC as off-road styling has grown more popular in recent years, according to Karl Brauer, executive publisher of Cox Automotive.

“These trademark versions of otherwise high-volume models can be great profit drivers and great marketing and sales opportunities for brands,” he said. “Denali, of course, has proven that over the last several years. Now they’re doing it again with AT4 … It widens the buyer base.”

Former GM President Dan Ammann told investors in 2018 the Denali was a “money machine” for the company.

‘Jewel in the crown’

But GMC needs to be cautious about AT4 not taking away from Denali models, particularly for the upcoming 2021 Yukon and Yukon XL SUVs. It hasn’t thus far with Sierra because they appeal to different buyers, according to Aldred.

Top-end Denali models represent about 60% of Yukon sales and command the highest average pricing of any GMC vehicle – a statistic GM hopes to maintain, if not grow, with the new models.

“Our Denali execution of this vehicle is the best we’ve ever done. It’s the jewel in the crown,” Aldred said. “It’s more premium, it’s richer and it’s even more bold than the outgoing model.”

The average price paid by customers for Yukon models was more than $61,200 and about $66,000 for Yukon XL in 2019. The current models can cost more than $80,000. GM has not announced pricing for the new models, which are expected to arrive in dealerships later this year.

GMC Sierra Denali tailgate

GM

“The big SUVs are the big money makers for any brand that offers them,” Brauer said. “And Denali is an even more profitable version of the Yukon and it makes that even more valuable as a key vehicle in their lineup.”

GM’s truck franchise, which includes pickups and full-size SUVs like the Yukon and Yukon XL, accounts for a $65 billion high-margin business, the company has said.

‘Huge year’

The Yukon models are the beginning of an important year for GMC following sales increasing 1.5% last year.

Aldred declined to discuss sales expectations for GMC this year but given the amount of redesigned models and the expansion of AT4, a sales decline would likely be disappointing.

“Effectively, the whole showroom is first full year or a new introduction,” he said. “It’s a huge year for GMC. It’s really one of those years that rarely happens.”

In addition to the redesigned Yukon SUVs, this year will mark the first full sales year for its redesigned heavy-duty pickups. It also recently refreshed the Acadia crossover and plans a “major” refresh of the compact Terrain crossover later this year, Aldred said.

GM, according to people familiar with the plans, also plans to announce the revival of the Hummer name as an all-electric pickup under the GMC brand.

A GM spokesman declined to comment on the automaker’s plans for the former its former gas-guzzling, military-style SUV.

The Detroit automaker has signed NBA star LeBron James to appear in a new commercial during the Super Bowl on Feb. 2, according to the people, who asked not to be identified because the plans aren’t yet public. The vehicle is expected by late 2021 or early 2022.



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USA and IRAN. 17 01 2020. Khmer News Today,Khmer Political News

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Analysts raise Apple price targets but Nomura warns the music may stop

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FAANG stocks displayed at the Nasdaq.

Adam Jeffery | CNBC

Morgan Stanley and Nomura analysts on Friday raised their price targets for Apple stock as the tech giant’s shares continue to surge.

However, the latter cautioned that inflated iPhone 12 expectations “may make the music stop” and questioned market enthusiasm about a “5G supercycle.”

In analyst notes published early on Friday, Morgan Stanley increased its price target for Apple from $296 per share to $368 per share while Nomura lifted its projection from $225 per share to $280 per share.

The good

Apple’s stock is up a staggering 103% over the past 12 months, and Morgan Stanley analysts projected that it will continue to outperform its hardware peers based on peaking smartphone replacement cycles combined with the upcoming 5G product cycle.

Morgan Stanley’s note highlighted that the iPhone replacement cycle has stretched to nearly four years since the market moved from subsidies to installment plans and the pace of technological change slowed.

“However, longer battery life and upcoming 5G technology which will enable new functionality like Augmented Reality combined with aggressive trade-in offers that subsidize upgrades for existing iPhone owners suggest replacement cycles can’t stretch much further and may in fact begin to shrink,” the note said.

At the same time, Apple’s dependency on the iPhone for earnings has declined, with services and wearables now constituting 27% and 37% of profits, Morgan Stanley pointed out.

The increased target is based on a higher full-year 2021 revenue base, increasing peer-driven price-to-earnings (P/E) multiples and the separation of Apple’s wearables, home and accessories products from the rest of its established hardware business, with a new and distinct multiple assigned to that business.

Morgan Stanley’s implied P/E target was upped on this basis from 19.1 times to 22.2 times. A P/E ratio is an important metric used by traders to gauge the value of a stock.

The bad

Nomura’s price target increase was based on strengthening iPhone demands and orders suggesting that the iPhone 11 cycle will carry through 2020, with wearables offering an extra boost.

However, Nomura analysts suggested that Apple’s current P/E ratio of 21 times earnings, up 4x since the iPhone 11 launched and 7x above its five-year average, was based primarily on market anticipation of a pending “5G supercycle,” which may be misguided.

“We expect the $40-80 incremental BoM (bill of materials) cost to a 5G phone to be a barrier to adoption,” the note said, adding that “no link in the value chain — consumers, suppliers, operators, or Apple itself — is likely to shoulder that cost burden.”

Nomura also pointed out that upgrade rates declined during the 3G to 4G cycle, and that Apple has ordered between 75 and 85 million iPhone 12 models for the second half of 2020.

This is up 10% from the 70 million to 75 million iPhone 11 models it ordered in the second half of 2019, but analysts argued that a $315 share price likely assumes full-year 2021 volumes of approximately 250 million, up 30% from full-year 2020 volumes.

As such, Nomura retained a “neutral” stance on Apple stock and applied an 18.5 times earnings multiple to reach its new target of $280 per share, but was “unwilling to go further.”



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Stanley Druckenmiller agrees with Tepper, still bullish the market because of the Fed and Trump

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Stanley Druckenmiller

Anjali Sundaram

This is breaking news. Please check back for updates.

Billionaire hedge fund manager Stanley Druckenmiller said Friday that he agrees with fellow investor David Tepper’s optimism on the market and said he’s still “riding the horse.”

“I revealed a very bullish posture intermediate term since October when Powell guaranteed he would not rescind the insurance cuts,” Druckenmiller said in an email to CNBC’s Joe Kernen. “Since then, both have worked out and the Fed is still whining about inflation being below target.”

“In addition, Trump’s election prospects have increased with two trade agreements and big win in Iran which the Democrats have responded poorly to,” he added. “So I am still ‘riding the horse’ and bullish immediate term.”



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