So far, General Motors (NYSE:GM) stock is still down for the year. Yet, after a historic deal with a major autoworkers’ union, General Motors could get back into the fast lane. There’s still a long road ahead, but I feel that October marked the bottom for GM stock, and I’m definitely bullish on it now.
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General Motors is a well-known American automaker with operations in Detroit, Michigan. Speaking of Detroit, that’s been the epicenter of controversy and press coverage during the past several weeks.
Along with Ford (NYSE:F) and Stellantis (NYSE:STLA), General Motors rounds out the Detroit Three group of American automotive giants. However, these giants were in trouble due to a widespread worker walkout. Nevertheless, it looks like General Motors will survive the ordeal bruised but certainly not out of commission.
October was a Bumpy Ride for General Motors
To put it mildly, October wasn’t General Motors’ best month. First of all, GM stock continued its downward slide that began in July.
On the other hand, with reduced prices, there is also opportunity. Believe it or not, General Motors now has a GAAP trailing 12-month price-to-earnings (P/E) ratio of just 4.1x. That’s a lot lower than the already reasonable sector median P/E ratio of 15.3x.
Still, it’s painful to watch the shares of an iconic American automaker lose so much value so quickly. Furthermore, in October, General Motors’ robotaxi company, known as Cruise, completely halted operations of its driverless vehicles in the U.S. Reportedly, this occurred because regulators in California ordered Cruise to remove its driverless cars from the state’s roadways due to safety concerns. Of course, this represents a setback for General Motors.
In addition to all of that, there was the United Auto Workers (UAW) walkout and strike in October. This hindered the operations of the Detroit Three Automakers, including General Motors. The company’s executives claimed that the UAW strike had cost General Motors $200 million per week. Moreover, the financial impact was so great and so uncertain that General Motors ended up withdrawing its profit guidance for 2023.
At Last, General Motors Strikes a Deal
If the UAW strike of October 2023 was history-making, then so was its resolution. Just recently, all of the Detroit Three automakers have reached tentative agreements to end the autoworkers’ strike.
The agreements are historic because they provide for large pay increases for the workers, assuming the UAW members vote to approve the deals (which I suspect they probably will). Recent reports suggest that General Motors’ autoworkers will likely receive pay raises of around 25%.
This will be financially costly for General Motors, but not nearly as costly as allowing the strike to continue. In time, I expect General Motors to resume its practice of providing full-year profit forecasts. The situation will return to normal, or at least a version of the “new normal.”
Also, investors shouldn’t dismiss General Motors’ third-quarter 2023 results. Sure, the company withdrew its full-year profit outlook, but General Motors also posted top- and bottom-line beats. Specifically, GM reported $44.1 billion in revenue, nearly $1 billion higher than the analyst consensus forecast. Additionally, the company’s adjusted earnings of $2.28 per share easily outpaced Wall Street’s estimate of $1.87 per share.
Now, the bullish argument for GM stock is starting to make a lot of sense. Barclays (NYSE:BCS) analysts upgraded General Motors shares from Equal Weight to Overweight, citing a “historically cheap” valuation. After a terrible October, perhaps November and December will be a lot easier for General Motors and its shareholders.
Is GM Stock a Buy, According to Analysts?
On TipRanks, GM comes in as a Moderate Buy based on 11 Buys, five Holds, and one Sell rating assigned by analysts in the past three months. The average General Motors price target is $44.71, implying 50.2% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell GM stock, the most accurate analyst covering the stock (on a one-year timeframe) is Ryan Brinkman of JPMorgan Chase (NYSE:JPM), with an average return of 14.25% per rating and a 63% success rate. Click on the image below to learn more.
Conclusion: Should You Consider GM Stock?
It really does feel like things can only get better for General Motors now. Remember, one rough month doesn’t need to define the entire year for a company.
Looking ahead, General Motors will have to make some financial adjustments in order to pay its workers higher wages. Will the consumers accept higher car prices? Only time will tell.
At least we can affirm that General Motors has likely resolved its issues with the company’s workers and can get back to the business of building and selling automobiles in huge quantities. So, if you can appreciate a rare value and a potentially epic comeback story in the making, I encourage you to consider GM stock.
