General Motors Stock Poised for a Strong Rally Towards $95 in 2024

GM Stock

Valued at approximately $49 billion in market capitalization, General Motors (NYSE:GM) stock has faced a decade of underperformance compared to broader market trends. Over the last ten years, GM shares have declined by 12%, with total returns, even after factoring in dividends, standing at a modest 17%. In stark contrast, the S&P 500 Index ($SPX) has tripled during the same period, including dividends.

While historical returns may not heavily influence current and future investor decisions, there are signs indicating a potential turnaround for General Motors stock in 2024.

Recent Surge Fuels Optimism

General Motors experienced a significant uptick last month, with its stock surging nearly 12% in a single trading session. This surge followed the revelation of a $10 billion share buyback program, showcasing GM’s commitment to enhancing shareholder value. In a week, the company, in collaboration with its banking partners, repurchased shares worth $6.8 billion, equivalent to 17% of total outstanding shares. Wall Street responded positively to GM’s aggressive buyback strategy, coupled with a 33% dividend increase to $0.12 per share.

Guidance Reinstatement and Value Proposition

Following the resolution of the United Auto Workers (UAW) strike, General Motors reinstated its guidance for 2023. Despite the strike’s impact, the company anticipates net income ranging between $9.1 billion and $9.7 billion for 2023, leading to adjusted EPS between $7.20 and $7.70. At forward earnings multiple of 5x, GM appears attractively valued, providing an opportunity for value-seeking investors.

Strategic Moves and Future Prospects

Recognizing its stock as undervalued, GM’s buyback plans aim to increase earnings per share by nearly 30%. Despite being a traditional auto manufacturer, General Motors positions itself for future growth by capitalizing on the global shift toward battery-powered vehicles and autonomous cars. With adjusted free cash flow projections between $10.5 billion and $11.5 billion in 2023, GM has room to further enhance shareholder value through debt reduction, acquisitions, increased dividends, and additional buybacks.

Target Price and Analyst Perspectives

Citigroup analyst Itay Michaeli has raised the target price for GM stock by 5.6% to $95, reflecting a bold 163% premium over current levels. Describing GM’s late November guidance update as encouraging, Michaeli maintains a “strong-buy” rating. While the majority of analysts are optimistic about GM, with 10 recommending “strong buy,” two suggesting “moderate buy,” six recommending “hold,” and one recommending “strong sell,” the average target price stands at $48.28, implying an expected upside of 33%.

In summary, General Motors stock appears poised for a robust rally in 2024, fueled by strategic moves, optimistic guidance, and a promising outlook in the evolving automotive landscape.

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