Summary
- General Motors is often overlooked by investors for pure-play electric vehicle stocks, but it offers potential in both electric and autonomous vehicles.
- The company has impressive EV and autonomous vehicle potential, with products like the Hummer EV, Chevy Silverado EV, and Cadillac Lyric SUV currently on the market.
- General Motors trades at a cheap valuation, making it an attractive investment with a low PE ratio and strong profitability.
- The company has an aggressive buyback program, reducing its outstanding share count by 18% in the past year alone.
- General Motors is in the early stages of a big transition with potential upside for patient investors, though there are risks to consider such as cyclical sales and credit risk.
Article
General Motors (NYSE: GM) is a stock that is often overlooked by investors who prefer pure-play electric vehicle stocks. However, the company offers a unique opportunity to invest in both electric and autonomous vehicles. GM is still in the early stages of developing its EV strategy, but has made impressive progress with products like the Hummer EV, Chevy Silverado EV, and Cadillac Lyric SUV. The company delivered 22,000 electric vehicles in the second quarter and is set to introduce several new models later this year. On the autonomous vehicle side, GM’s Cruise subsidiary has partnered with Uber to develop a driverless rideshare service, with Cruise vehicles conducting road tests in three cities.
Despite its potential, General Motors trades at a remarkably cheap valuation of 5.5 times trailing-12-month earnings and less than 5 times earnings estimates for the next 12 months. This cheap valuation is a result of strong profitability, with GM posting its best quarterly sales since 2020 in the second quarter while maintaining pricing power that is above the industry average. The company produced $5.3 billion in automotive free cash flow in the second quarter alone. GM also has an aggressive stock buyback program, with management reducing outstanding share count by 18% over the past year and announcing an additional $6 billion buyback plan in June with a near-term target of reducing the outstanding share count to less than 1 billion.
General Motors is in the early stages of a significant transition, with the potential to capitalize on the growth of electric and autonomous vehicles. While the auto business can be highly cyclical, GM is well-positioned to navigate these challenges. The company’s profitable ICE business, along with its electric vehicle strategy and aggressive buyback program, offers potential for substantial upside for patient investors. Despite the risks associated with the auto industry and GM’s financing business, the company’s strong management and potential for growth make it an attractive investment opportunity.
Investors considering buying General Motors stock should take into account the insights from The Motley Fool Stock Advisor analyst team, which has identified what they believe are the 10 best stocks for investors to buy now. While General Motors did not make the cut, the 10 stocks recommended by the team could potentially offer significant returns in the coming years. The Stock Advisor service provides investors with guidance on building a successful portfolio, regular updates from analysts, and two new stock picks each month. By following the recommendations of The Motley Fool analysts and staying informed about investment opportunities, investors can make informed decisions about their portfolios and potentially achieve significant returns over time.
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