Three Strong Motives to Purchase General Motors Shares without Considering the Future
General Motors (GM), often overlooked by investors, is a hidden gem in the electric vehicle and autonomous vehicle market. While its internal combustion engine pickups and SUVs drive profits, GM is in the early stages of an electric revolution.
The company's EV strategy is off to a impressive start. Hummer EV, Chevy Silverado EV, and Cadillac Lyric SUV are just a few of the products already available. In Q2, GM delivered 22,000 electric vehicles, representing a 40% year-over-year growth, and a market share that's 2.2 percentage points higher than last year. With several new models set to reach dealerships soon, this growth trend could become a long-term tailwind for the company.
On the autonomous vehicle front, GM's Cruise subsidiary partnered with Uber to develop a driverless rideshare service. After facing setbacks, Cruise vehicles are now conducting road tests in three cities.
GM is trading at a remarkably cheap valuation. At 5.5 times trailing-12-month earnings and less than 5 times earnings estimates for the next 12 months, profits have exceeded expectations, and the market doesn't seem to trust GM's ability to maintain or grow profitability. This low valuation is due to GM's massive profitability, which saw $5.3 billion in automotive free cash flow in Q2 alone, and sales that exceeded industry averages.
To demonstrate its confidence in its stock, GM has one of the most aggressive buyback programs in the industry. In late 2023, the company announced a $10 billion buyback plan, which it has already used to reduce its share count by 18% in a year. With additional $6 billion buyback plan in June and a goal of reducing the outstanding share count to less than 1 billion, investing in GM stock could potentially drive earnings-per-share growth.
Despite the risks, such as market volatility and regulatory issues, GM's potential and strong financial management make it an attractive investment opportunity. If the company can successfully transition to electric and autonomous vehicles, there could be significant upside for patient investors.
Enrichment Data:General Motors' electric vehicle initiatives include deploying AI-driven EV charging stations across the U.S. by 2025, building a charging network through GM Energy, and working with utilities to develop vehicle-to-grid (V2G) technology. On the autonomous vehicle front, GM is shifting its focus from robotaxis to personal autonomous vehicles, saving costs while aligning with the evolving fiscal and regulatory landscapes. GM's valuation appears modestly undervalued, with a lower P/E ratio than the industry median, and a market capitalization below its potential assets. The company's efforts in share repurchases and robust financial performance further position it as an attractive investment opportunity for value-oriented investors.
Considering GM's impressive electric vehicle growth and its aggressive buyback program, investing in its stock could potentially boost earnings-per-share due to the reduction in share count. The company's electric revolution, with products like the Hummer EV and Chevy Silverado EV, is driving significant sales and market share gains, offering potential for long-term profitability.
Given GM's focus on electric and autonomous vehicles, along with its lower P/E ratio compared to the industry median and undervalued market capitalization, financing investments in this company could yield substantial returns for investors keen on supporting sustainable and technologically advanced automotive solutions.
