Citi sets $62 price target on General Motors stock with Buy rating

On Wednesday, Citi initiated coverage on General Motors (NYSE:GM) with a positive outlook, assigning a Buy rating and setting a price target of $62.00. With a current market capitalization of $46.9 billion and trading at a P/E ratio of just 7x, InvestingPro analysis indicates GM is currently undervalued. The firm’s analysis suggests that despite new tariffs posing a near-term challenge for General Motors, the company has strategies in place to mitigate these effects over time.

General Motors has the capacity to adjust its production to lessen the impact of tariffs, particularly with underutilized plants in Ft. Wayne, Indiana, and Spring Hill, Tennessee. These facilities can increase production of vehicles that are currently assembled in Mexico for the U.S. market, potentially offsetting some of the tariff costs. Additionally, GM has the option to shift production of certain vehicles imported from China for the Mexican market to its Mexican plants.

The financial health of General Motors appears robust, according to Citi’s analysis. InvestingPro data confirms this assessment with a "GOOD" overall financial health score, while also highlighting that management has been aggressively buying back shares. The cost-saving measures implemented during the 2008 restructuring have sustained, effectively halving GM’s breakeven point. These cost improvements, along with capital efficiencies, have led to a significant increase in cash generation for the company, evidenced by an impressive free cash flow yield of 21%.

Over the past three years, General Motors has produced $30 billion in surplus operating cash flow, with two-thirds of that amount returned to shareholders. The company has raised its dividend for three consecutive years, with a notable 33.33% dividend growth in the last twelve months. Despite the expected short-term headwinds from the tariffs, Citi anticipates that GM’s strong cash generation will persist into 2025-26. For deeper insights into GM’s financial health and growth potential, access the comprehensive Pro Research Report available on InvestingPro, along with 8 additional exclusive ProTips.

Citi’s commentary also included a comparative preference for General Motors over its competitor Ford, suggesting that applying the lower end of their targeted multiple range to their 2025 and 2026 estimates supports a $62 per share price target for GM. This outlook reflects Citi’s confidence in General Motors’ ability to navigate current challenges while continuing to reward its shareholders.

In other recent news, General Motors has announced a temporary halt in the production of its electric commercial van at its Ontario assembly plant, resulting in the layoff of 1,200 workers. This pause is due to lower-than-expected sales and is planned to last until October 2025. Additionally, General Motors has temporarily laid off approximately 200 workers at its Factory Zero plant in Detroit, as the company adjusts production to align with market dynamics. Meanwhile, RBC Capital Markets has revised its outlook on General Motors, lowering the stock price target from $67.00 to $55.00, while maintaining an Outperform rating. This adjustment reflects revised expectations for the company’s electric vehicle production volumes, now projected at 300,000 units instead of 600,000. RBC Capital also forecasts that General Motors will hold a net cash position of $14 billion by the end of 2025, up from $4.4 billion in 2020. In another development, the Canadian government is offering tariff exemptions to automakers, including General Motors, provided they maintain local production in Canada. This policy aims to support companies with assembly plants in Ontario while they import vehicles from the U.S.

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