The Divergence in Automotive Fortunes
Bucking market trends, General Motors (GM) witnessed a surge, hitting new 52-week highs, climbing 22.5% for the year. This performance outpaced the S&P 500 Index. In contrast, Tesla (TSLA) languished as the worst-performing S&P 500 constituent. The landscape further darkened for electric vehicle (EV) companies, with some trading near historic lows.
The GM Advantage: Valuation Prowess
General Motors company itself believes in the allure of its undervalued stock. At the recent Bank of America 2024 Global Auto Summit, GM’s CFO Paul Jacobson emphasized the company’s low valuation multiple. Looking at its 2024 guidance, GM anticipates robust adjusted earnings per share (EPS) growth, propelled by a massive $10 billion share buyback announced last year. This move is set to push up the 2024 EPS significantly.
Historical Value Revisited
By various key valuation metrics, GM stock appears significantly undervalued compared to historical benchmarks. With a next 12-month (NTM) price-to-sales multiple below the three-year average and an NTM price-to-earnings (PE) multiple at a discount, GM’s valuation is starkly attractive. Notably, GM’s automotive free cash flows are projected to remain robust, albeit slightly lower than the previous year.
Projections and Market Sentiments
Analysts have bestowed GM with a “Moderate Buy” rating, highlighting the stock’s potential. With a mean target price that sits comfortably above recent closing prices and a sky-high target of $95, GM forecasts a promising outlook. While challenges exist on the horizon, including production hiccups in its EV offerings, GM’s strategic adjustments towards enhancing shareholder value could be a game-changer.