On Thursday, Citi reiterated its Buy rating and $95.00 price target for General Motors (NYSE:GM), suggesting confidence in the automaker's resilience despite ongoing industry challenges. The firm anticipates General Motors to deliver a strong performance for the first quarter, marking a continuation of its robust financial results.
According to Citi, the skepticism surrounding legacy automakers like GM and Ford (NYSE:F) is fading, as concerns about various industry disruptions and regulatory pressures have not significantly hindered their operations. The firm points out that the strength of GM's truck and commercial vehicle segments has been underestimated, and the company has successfully navigated through inflation and competitive threats.
Citi also compares the valuation perceptions of GM with Boeing (NYSE:BA), noting that despite Boeing's recent challenges, it trades at approximately 12 times its expected 2026 free cash flow per share. Applying a similar multiple to GM's estimated 2024 free cash flow per share aligns with Citi's near-term price target for GM, with the North American Pickup Truck and Commercial market being highlighted for its growth and competitive moats.
The firm expects GM to confirm its guidance and notes that while first-quarter results are unlikely to significantly uplift 2024 street estimates due to slightly elevated inventory levels, there is potential for 2025 estimates to increase. Attention is also turning to the ramp-up of GM's Ultium battery platform and the potential for U.S. electric vehicle (EV) market share gains, following Tesla (NASDAQ:TSLA)'s first-quarter delivery numbers.
Moreover, Citi speculates on the future of GM's autonomous vehicle division, Cruise, suggesting it may seek partnerships with rideshare companies to reduce losses and execution risks. While the outcome of Cruise's strategy is uncertain, it is not factored into the $95 price target, indicating additional potential for upside if the plan is deemed credible.
Lastly, Citi suggests that GM could benefit from segmenting or separately disclosing its Truck versus Non-Truck franchises, which would provide a clearer picture of the company's EV accretion path and potentially drive sum-of-parts valuation considerations.
InvestingPro Insights
In light of Citi's optimistic outlook for General Motors, current InvestingPro data provides additional context that may interest investors. General Motors has a market capitalization of $52.15 billion and is trading at a compelling price-to-earnings (P/E) ratio of 6.14, with an adjusted P/E ratio over the last twelve months as of Q4 2023 at an even lower 5.17. This suggests that the stock could be undervalued relative to its earnings, especially when considering the company's revenue growth of 9.64% over the last twelve months.
InvestingPro Tips highlight that management's aggressive share buybacks and the stock's strong return over the last three months, with a 27.65% price total return, may signal confidence in the company's financial health and strategic direction. Additionally, the stock is trading near its 52-week high, at 98.78% of this peak, which aligns with Citi's high price target and suggests a bullish sentiment among investors.
For those looking to delve deeper into General Motors' financial health and stock performance, InvestingPro offers further insights and tips. There are 11 additional InvestingPro Tips available, which could provide a more comprehensive investment perspective. To access these tips and enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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