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GM Trading at a Deep Discount: 6 Reasons to Buy the Stock Now
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U.S. legacy automaker General Motors (GM - Free Report) is trading quite cheap at the moment from a valuation standpoint despite record financials and strong fundamentals. With a forward sales multiple of just 0.27 — below its five-year average and industry — GM presents an attractive value opportunity. It has a Value Score of A.
Image Source: Zacks Investment Research
General Motors’ full-year 2024 revenues grew 9% to roughly $187 billion. It also set new records in adjusted EBIT ($14.9 billion). Annual earnings spiked 38% to a record $10.60 per share. Going by the P/E metric also, GM looks quite undervalued, with forward earnings multiple of 4.22, lower than the industry and its 5-year average.
Image Source: Zacks Investment Research
After having surged more than 45% last year, the stock has inched down 8% year to date largely due to broader economic uncertainty and tariff concerns. However, the auto sector as a whole has seen steeper declines, and GM remains better-positioned to navigate these challenges. With strong fundamentals and an attractive valuation, the stock is expected to drive future gains and makes for a solid bet now.
YTD Price Performance
Image Source: Zacks Investment Research
Why We are Bullish on General Motors
GM US Market Share Rising: General Motors is the top-selling automaker in the United States. Its compelling portfolio with strong demand for its quality pickups and SUVs bodes well for delivery growth. The company’s hot-selling brands in America, namely Chevrolet, Buick, GMC and Cadillac, are boosting the top line. GM’s full-year market share in the United States rose 30 basis points to 16.5% in 2024.
Strong E-Mobility Strides: General Motors was the second best-selling EV maker in the United States in the second half of 2024, trailing only Tesla (TSLA - Free Report) . GM’s 114,000 EV sales last year marked a 50% year-over-year increase. The company’s EV portfolio turned variable profit positive in the fourth quarter of 2024 due to scale efficiencies, lower costs, and new launches like the Cadillac Escalade IQ and Sierra EV. GM targets to manufacture 300,000 electric vehicles, expecting $2 billion in lower EV losses this year. Key supply deals with Vianode, Lithium Americas, LG Chemical, POSCO and Livent strengthen its electrification strategy.
Restructuring Efforts in China: General Motors’ China restructuring efforts, including rightsizing operations, launching new products, and optimizing dealer inventory and costs, are starting to pay off. Excluding $5 billion in restructuring costs, GM reported positive equity income from its China business in the final quarter of 2024. Deliveries surged more than 40% sequentially, the largest quarterly increase since the second quarter of 2022. With these improvements, GM aims to return its China operations to profitability this year.
Cost Cut Initiatives: General Motors met its $2 billion net fixed cost reduction target by the end of 2024. By exiting robotaxi development and refining its autonomous strategy, the company expects $1 billion in annualized savings. Backed by strong vehicle demand and disciplined cost management, GM now projects adjusted EPS of $11-$12 in 2025, up from $10.60 in 2024.
Solid Liquidity & Investor-friendly Moves: GM generated $14 billion in adjusted auto free cash flow in 2024 and returned $7.6 billion to shareholders via dividends and buybacks. It met its goal of reducing shares below 1 billion, closing the year at 995 million shares. With $35.5 billion in liquidity, including $21.7 billion in cash, GM’s balance sheet is solid. Last month, it announced a dividend hike of 25%—the new dividend of 15 cents/share will take effect with GM’s next planned payout to be declared in April 2025, bringing it in line with its closest rival, Ford (F - Free Report) . GM also announced a $6 billion buyback program. The plan includes a $2 billion accelerated repurchase, set to finish by the second quarter of 2025, leaving $4.3 billion for future buybacks.
GM’s Strategic Tariff Readiness: General Motors is the largest U.S. automaker importing from Mexico, with 750,000 vehicles shipped from Mexico and Canada in 2024. Popular models like the Chevy Silverado and GMC Sierra are built there. Trump’s 25% tariff on imports is delayed until April 2 but GM has been preparing since November. The company cut international inventory by 30%, reducing exposure to sudden cost spikes. It is also optimizing supply chains with logistics partners. While Ford has warned of chaos, GM has cost-effective strategies in place to adapt and appears better positioned than rivals to handle the impact and sustain long-term growth.
GM is a Solid Pick
Based on the above-mentioned tailwinds, investors should consider parking their cash in General Motors now. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for GM’s 2025 and 2026 EPS implies a year-over-year uptick of 9% and 4%, respectively. The estimates for current and next fiscal have moved up 7 cents and 11 cents, respectively, over the past 30 days.
The Wall Street average target price of $59.92 for GM stock suggests an upside of more than 22% from current levels.
Image: Bigstock
GM Trading at a Deep Discount: 6 Reasons to Buy the Stock Now
U.S. legacy automaker General Motors (GM - Free Report) is trading quite cheap at the moment from a valuation standpoint despite record financials and strong fundamentals. With a forward sales multiple of just 0.27 — below its five-year average and industry — GM presents an attractive value opportunity. It has a Value Score of A.
General Motors’ full-year 2024 revenues grew 9% to roughly $187 billion. It also set new records in adjusted EBIT ($14.9 billion). Annual earnings spiked 38% to a record $10.60 per share. Going by the P/E metric also, GM looks quite undervalued, with forward earnings multiple of 4.22, lower than the industry and its 5-year average.
After having surged more than 45% last year, the stock has inched down 8% year to date largely due to broader economic uncertainty and tariff concerns. However, the auto sector as a whole has seen steeper declines, and GM remains better-positioned to navigate these challenges. With strong fundamentals and an attractive valuation, the stock is expected to drive future gains and makes for a solid bet now.
YTD Price Performance
Why We are Bullish on General Motors
GM US Market Share Rising: General Motors is the top-selling automaker in the United States. Its compelling portfolio with strong demand for its quality pickups and SUVs bodes well for delivery growth. The company’s hot-selling brands in America, namely Chevrolet, Buick, GMC and Cadillac, are boosting the top line. GM’s full-year market share in the United States rose 30 basis points to 16.5% in 2024.
Strong E-Mobility Strides: General Motors was the second best-selling EV maker in the United States in the second half of 2024, trailing only Tesla (TSLA - Free Report) . GM’s 114,000 EV sales last year marked a 50% year-over-year increase. The company’s EV portfolio turned variable profit positive in the fourth quarter of 2024 due to scale efficiencies, lower costs, and new launches like the Cadillac Escalade IQ and Sierra EV. GM targets to manufacture 300,000 electric vehicles, expecting $2 billion in lower EV losses this year. Key supply deals with Vianode, Lithium Americas, LG Chemical, POSCO and Livent strengthen its electrification strategy.
Restructuring Efforts in China: General Motors’ China restructuring efforts, including rightsizing operations, launching new products, and optimizing dealer inventory and costs, are starting to pay off. Excluding $5 billion in restructuring costs, GM reported positive equity income from its China business in the final quarter of 2024. Deliveries surged more than 40% sequentially, the largest quarterly increase since the second quarter of 2022. With these improvements, GM aims to return its China operations to profitability this year.
Cost Cut Initiatives: General Motors met its $2 billion net fixed cost reduction target by the end of 2024. By exiting robotaxi development and refining its autonomous strategy, the company expects $1 billion in annualized savings. Backed by strong vehicle demand and disciplined cost management, GM now projects adjusted EPS of $11-$12 in 2025, up from $10.60 in 2024.
Solid Liquidity & Investor-friendly Moves: GM generated $14 billion in adjusted auto free cash flow in 2024 and returned $7.6 billion to shareholders via dividends and buybacks. It met its goal of reducing shares below 1 billion, closing the year at 995 million shares. With $35.5 billion in liquidity, including $21.7 billion in cash, GM’s balance sheet is solid. Last month, it announced a dividend hike of 25%—the new dividend of 15 cents/share will take effect with GM’s next planned payout to be declared in April 2025, bringing it in line with its closest rival, Ford (F - Free Report) . GM also announced a $6 billion buyback program. The plan includes a $2 billion accelerated repurchase, set to finish by the second quarter of 2025, leaving $4.3 billion for future buybacks.
GM’s Strategic Tariff Readiness: General Motors is the largest U.S. automaker importing from Mexico, with 750,000 vehicles shipped from Mexico and Canada in 2024. Popular models like the Chevy Silverado and GMC Sierra are built there. Trump’s 25% tariff on imports is delayed until April 2 but GM has been preparing since November. The company cut international inventory by 30%, reducing exposure to sudden cost spikes. It is also optimizing supply chains with logistics partners. While Ford has warned of chaos, GM has cost-effective strategies in place to adapt and appears better positioned than rivals to handle the impact and sustain long-term growth.
GM is a Solid Pick
Based on the above-mentioned tailwinds, investors should consider parking their cash in General Motors now. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for GM’s 2025 and 2026 EPS implies a year-over-year uptick of 9% and 4%, respectively. The estimates for current and next fiscal have moved up 7 cents and 11 cents, respectively, over the past 30 days.
The Wall Street average target price of $59.92 for GM stock suggests an upside of more than 22% from current levels.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.