President-Elect Donald Trump’s decision to appoint billionaire hedge fund manager Scott Bessent as the next secretary of the Department of Treasury was well received by markets yesterday with the S&P 500 and Dow Jones reaching new highs.
However, auto stocks have sold off sharply on Tuesday amid Trump’s plan to implement a 25% tariff on imported goods from Canada and Mexico. This would dissolve the USMCA (United States-Mexico-Canada) free trade agreement with auto giant General Motors GM expected to feel the brunt of the impact.
With operations throughout North America, GM shares have fallen -8% in today's trading session. Optimistically, investors may be wondering if the selloff could be a buying opportunity as GM hit a 52-week high of $61 a share to start the week and is still sitting on +50% gains year to date.
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GM’s Strong Financial Performance
Leading to the recent peak in GM has been the company’s strong financial performance with total sales now expected to increase 5% in fiscal 2024 to what would be an annual record of $180.02 billion based on Zacks estimates. Despite GM’s top line projected to dip -2% next year, the company would remain the largest U.S. automaker in terms of revenue ahead of Ford F and Tesla TSLA which are expected to bring in $174.28 billion and $99.65 billion in FY24 respectively.
More impressive, GM is on pace to set an annual record for profitability as well with earnings forecasted to soar 34% in FY24 to $10.29 per share versus EPS of $7.68 last year. Furthermore, FY25 EPS is projected to expand another 2%.
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GM’s Attractive Valuation
Most glaring in regards to General Motors stock being a buy-the-dip candidate is that GM trades at 5.8X forward earnings. Trading at a considerable discount to the S&P 500’s 25.3X forward earnings multiple and its Zacks Automotive-Domestic Industry average of 13.1X, GM also trades beneath Ford’s 6.2X with Tesla at a noticeable premium of 137.2X.
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As the largest domestic automaker in terms of revenue, GM trades at just 0.3X sales with its industry average at 1X and the S&P 500 at 5.4X.
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GM's EV Expansion
Most compelling to long-term investors has been GM’s expansion in the electric vehicle market. Led by its Chevy Equinox EV, GM’s EV sales most recently skyrocketed 192% during Q3 2024 to 32,095 units compared to 11,006 EVs sold in the prior-year quarter. As of now, GM has surpassed Ford in terms of total EV sales in the U.S. this year behind Tesla.
Image Source: GM.com
Bottom Line
On pace for a record year, it's hard to overlook General Motors stock as a buy-the-dip target with GM sporting a Zacks Rank #2 (Buy). Still, it will be important to pay attention to the trend of earnings estimate revisions for General Motors’ FY25 as some analysts believe President Trump’s proposed tariffs on Canada and Mexico could affect the auto giant’s profit margins by 2% or more.
That said, the tarriff proposal could be a bargaining ploy for Trump considering free trade agreements have been in place between the U.S., Canada, and Mexico since 1994.
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Today, See These 5 Potential Home Runs >>General Motors Company (GM) : Free Stock Analysis Report
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