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Trading Near 52-Week High, Why GM Stock is Still Worth Buying Now
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U.S. legacy automaker General Motors (GM - Free Report) is having a great run on the bourses lately. In the last four trading sessions, the stock was hovering at more than $49/share, closing at $49.78 on Friday. That’s quite close to its 52-week high of $50.50.
One of the world’s largest and trusted automakers with a market cap of more than $55 billion, General Motors held the largest share of the U.S. auto market at 16.2% in 2023. While GM’s internal combustion engine (“ICE”) pickups and SUVs have been popular and profitable, the company is also pouring vast sums of money to ramp up investment in eco-friendly vehicles.
With the future of mobility being electric and autonomous, General Motors is one stock that seems to be hitting the right notes and is also trading at a massive discount. Shares of the company have surged more than 38% year to date, outperforming the industry, sector and S&P 500, as well as its closest peer, Ford (F - Free Report) .
YTD Price Performance
Image Source: Zacks Investment Research
GM Stock Trading Cheap
The company surpassed profit estimates in each of the trailing four quarters, with the average earnings surprise being 18.8%. It is also witnessing northbound estimate revisions for 2024 and 2025.
Image Source: Zacks Investment Research
With earnings estimates on the rise, General Motors’ price-to-earnings valuation is very attractive at just 4.98 forward earnings. This is nicely beneath the industry average of 33.93. Even better, GM stock is trading 60% below its 5-year high of 12.68 and at a 15.7% discount to the median. As such, even trading near yearly highs, the stock still offers great value to investors, commanding a Value Score of A currently.
Image Source: Zacks Investment Research
General Motors’ cash flow is also attractive with the company raising its guidance for adjusted automotive FCF in the band of $9.5-$11.5 billion, higher than the previous forecast of $8.5-$10.5 billion. Going by GM’s price-to-cash flow as well, the stock appears to have strong value right now.
Many professional investors favor the P/CF ratio because cash flow is harder to manipulate on the income statement, making it a reliable indicator of a company's financial health. At 2.95, General Motors P/CF is intriguingly below the industry 5-year average of 19.23.
Image Source: Zacks Investment Research
5 Reasons We Are Bullish on General Motors
Cost-Containment Efforts: General Motors is on track to achieve its $2 billion net cost reduction by 2024. In 2023, the company cut $1.4 billion in fixed costs, offset by $400 million in higher depreciation and amortization, yielding a $1 billion net reduction. It expects to reduce an additional $1 billion this year.
GMNA Strength: General Motors successfully increased its market share in the United States to 16.6% in the second quarter of 2024, up 1.2 percentage points sequentially. GM’s North American sales surpassed pre-pandemic levels for the first time in four years. Operating margins were also high due to the ongoing optimization of production processes. On the back of encouraging first-half 2024 results, GMNA’s market strength and cost-reduction efforts, the company lifted 2024 forecasts. GM now forecasts adjusted EBIT of $13-$15 billion, up from $12.5-$14.5 billion. Adjusted EPS is now expected to be in the range of $9.5-$10.5, up from $9-$10.
Electrification Strides: General Motors has dispelled early fears that Tesla (TSLA - Free Report) and other EV makers would erode its industry standing. While the EV market faces near-term challenges, GM is advancing its electrification strategy. By reducing battery costs, launching new models, and scaling production, GM aims to achieve variable profitability in its EV segment by the fourth quarter of 2024. The Ultium Drive system and battery plants in Ohio, Tennessee and Lansing are key to its e-mobility ambitions. With models like the Hummer EV, Chevy Silverado EV, and Cadillac Lyriq already on the market, GM delivered 22,000 electric vehicles in the second quarter, marking 40% year-over-year growth. New models arriving later this year could further boost its long-term prospects.
Cruise Gets a Major Push: While GM’s self-driving unit, Cruise, has faced setbacks and challenges, the outlook is improving. Cruise plans to resume fully autonomous rides later this year and potentially start charging fares by early 2025. A key development is its multiyear strategic partnership with Uber Technologies (UBER - Free Report) , set for launch in 2025, wherein Uber will offer Cruise robotaxis on its platform. This collaboration could significantly boost Cruise's robotaxi business and unlock lucrative opportunities.
Strong Financials & Robust Share Buyback: General Motors is well-positioned to weather short-term challenges, with $35.8 billion in automotive liquidity as of June 30, including $22.5 billion in cash and equivalents. The firm’s $10 billion accelerated buyback, set to conclude in the fourth quarter of 2024, and an additional $6 billion authorized in June reflect confidence in its financial stability and future performance.
Ride GM Stock for Higher Highs
The Zacks average price target for GM stock is $55.74 per share, indicating a potential upside of nearly 12% from current levels. If General Motors continues to execute its EV strategy effectively while maintaining the strength of its profitable ICE business, investors could see significant gains.
Despite the stock trading near its 52-week high, it's still an opportune time to buy GM, thanks to its strong fundamentals, attractive valuation and positive estimate revisions. The Zacks Consensus Estimate for 2024 implies a 4% year-over-year increase in sales and a 29% rise in EPS, signaling strong growth potential ahead.
Image: Bigstock
Trading Near 52-Week High, Why GM Stock is Still Worth Buying Now
U.S. legacy automaker General Motors (GM - Free Report) is having a great run on the bourses lately. In the last four trading sessions, the stock was hovering at more than $49/share, closing at $49.78 on Friday. That’s quite close to its 52-week high of $50.50.
One of the world’s largest and trusted automakers with a market cap of more than $55 billion, General Motors held the largest share of the U.S. auto market at 16.2% in 2023. While GM’s internal combustion engine (“ICE”) pickups and SUVs have been popular and profitable, the company is also pouring vast sums of money to ramp up investment in eco-friendly vehicles.
With the future of mobility being electric and autonomous, General Motors is one stock that seems to be hitting the right notes and is also trading at a massive discount. Shares of the company have surged more than 38% year to date, outperforming the industry, sector and S&P 500, as well as its closest peer, Ford (F - Free Report) .
YTD Price Performance
GM Stock Trading Cheap
The company surpassed profit estimates in each of the trailing four quarters, with the average earnings surprise being 18.8%. It is also witnessing northbound estimate revisions for 2024 and 2025.
Image Source: Zacks Investment Research
With earnings estimates on the rise, General Motors’ price-to-earnings valuation is very attractive at just 4.98 forward earnings. This is nicely beneath the industry average of 33.93. Even better, GM stock is trading 60% below its 5-year high of 12.68 and at a 15.7% discount to the median. As such, even trading near yearly highs, the stock still offers great value to investors, commanding a Value Score of A currently.
Image Source: Zacks Investment Research
General Motors’ cash flow is also attractive with the company raising its guidance for adjusted automotive FCF in the band of $9.5-$11.5 billion, higher than the previous forecast of $8.5-$10.5 billion. Going by GM’s price-to-cash flow as well, the stock appears to have strong value right now.
Many professional investors favor the P/CF ratio because cash flow is harder to manipulate on the income statement, making it a reliable indicator of a company's financial health. At 2.95, General Motors P/CF is intriguingly below the industry 5-year average of 19.23.
Image Source: Zacks Investment Research
5 Reasons We Are Bullish on General Motors
Cost-Containment Efforts: General Motors is on track to achieve its $2 billion net cost reduction by 2024. In 2023, the company cut $1.4 billion in fixed costs, offset by $400 million in higher depreciation and amortization, yielding a $1 billion net reduction. It expects to reduce an additional $1 billion this year.
GMNA Strength: General Motors successfully increased its market share in the United States to 16.6% in the second quarter of 2024, up 1.2 percentage points sequentially. GM’s North American sales surpassed pre-pandemic levels for the first time in four years. Operating margins were also high due to the ongoing optimization of production processes. On the back of encouraging first-half 2024 results, GMNA’s market strength and cost-reduction efforts, the company lifted 2024 forecasts. GM now forecasts adjusted EBIT of $13-$15 billion, up from $12.5-$14.5 billion. Adjusted EPS is now expected to be in the range of $9.5-$10.5, up from $9-$10.
Electrification Strides: General Motors has dispelled early fears that Tesla (TSLA - Free Report) and other EV makers would erode its industry standing. While the EV market faces near-term challenges, GM is advancing its electrification strategy. By reducing battery costs, launching new models, and scaling production, GM aims to achieve variable profitability in its EV segment by the fourth quarter of 2024. The Ultium Drive system and battery plants in Ohio, Tennessee and Lansing are key to its e-mobility ambitions. With models like the Hummer EV, Chevy Silverado EV, and Cadillac Lyriq already on the market, GM delivered 22,000 electric vehicles in the second quarter, marking 40% year-over-year growth. New models arriving later this year could further boost its long-term prospects.
Cruise Gets a Major Push: While GM’s self-driving unit, Cruise, has faced setbacks and challenges, the outlook is improving. Cruise plans to resume fully autonomous rides later this year and potentially start charging fares by early 2025. A key development is its multiyear strategic partnership with Uber Technologies (UBER - Free Report) , set for launch in 2025, wherein Uber will offer Cruise robotaxis on its platform. This collaboration could significantly boost Cruise's robotaxi business and unlock lucrative opportunities.
Strong Financials & Robust Share Buyback: General Motors is well-positioned to weather short-term challenges, with $35.8 billion in automotive liquidity as of June 30, including $22.5 billion in cash and equivalents. The firm’s $10 billion accelerated buyback, set to conclude in the fourth quarter of 2024, and an additional $6 billion authorized in June reflect confidence in its financial stability and future performance.
Ride GM Stock for Higher Highs
The Zacks average price target for GM stock is $55.74 per share, indicating a potential upside of nearly 12% from current levels. If General Motors continues to execute its EV strategy effectively while maintaining the strength of its profitable ICE business, investors could see significant gains.
Despite the stock trading near its 52-week high, it's still an opportune time to buy GM, thanks to its strong fundamentals, attractive valuation and positive estimate revisions. The Zacks Consensus Estimate for 2024 implies a 4% year-over-year increase in sales and a 29% rise in EPS, signaling strong growth potential ahead.
GM stock carries a Zacks Rank #2 (Buy) and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.