General Motors (NYSE:GM) is in the news due to a major controversy. It’s a United Auto Workers (UAW) strike, and many investors are concerned, but this shouldn’t deter you from considering a share position in General Motors. In fact, I am actually bullish on GM stock because it presents terrific value right now.
General Motors is an iconic American automaker that also offers electric vehicles but is famous for its powerful trucks. Controversial issues have come and gone over the years, but General Motors has stuck around and sold plenty of vehicles.
Still, when a crisis strikes, there’s no shortage of folks on social media who would declare the untimely end of General Motors as a going venture. I believe it’s best to stay calm and relax and conduct your due diligence on General Motors, even if the headlines might shake some jittery investors out of a perfectly reasonable trade.
The Auto Workers Strike Begins
Some commentators might call this a historic moment. There have been auto worker strikes before, but this one is on a massive scale, and it’s targeting the so-called Detroit Three: General Motors, Ford (NYSE:F), and Stellantis (NYSE:STLA).
Here’s the lowdown. Starting Thursday night, workers represented by the UAW officially went on strike because the three aforementioned Detroit car companies were unable to reach an agreement with the union. It’s considered a historic event because this marks the first time in the UAW’s 88-year history that it has gone on strike against all three Detroit car companies at the same time.
Some GM stockholders are nervous for a few different reasons. First of all, this is a large-scale workers’ strike; approximately 12,700 workers, in total, went on strike across three Detroit production plants. Furthermore, the scale of the protests could grow, as UAW President Shawn Fain warned that if negotiations continue to stall, workers at more plants may go on strike.
Analysts with Evercore ISI certainly haven’t helped to calm skittish GM shareholders down. The analysts warned that the “companies’ pickup-truck plants are likely the next target of the United Auto Workers union.” Additionally, the Evercore ISI analysts reportedly predicted that the UAW strike “could hit max pain” for the automakers if that happens since SUVs and pickup trucks are their most profitable vehicles.
Chill Out, and Focus on Value
Amid the apparent headline risk, GM stock remained surprisingly flat yesterday. What could possibly explain the market’s calm response to a historic strike?
Always remember that the financial markets are forward-looking. This explains, for example, why the stock market can march upward even while the Federal Reserve is hiking interest rates. The market is optimistic because it foresees that the Federal Reserve will eventually stop raising interest rates.
Similarly, there were enough calm and forward-looking investors to keep GM stock fairly flat yesterday. They understand that workers’ strikes don’t last forever, and there may be a relief rally in store when the UAW and General Motors reach an agreement.
So, instead of focusing on headline risk, just stick to the basics. General Motors stock presents great value for a number of reasons. For one thing, General Motors is profitable and has a strong track record of beating analysts’ quarterly EPS forecasts. Also, the company has grown its free cash flow and its gross profits over time.
In addition, General Motors’ GAAP-measured trailing 12-month price-to-earnings (P/E) ratio is quite reasonable, at just 4.69x. For comparison, the sector median P/E ratio is 15.82x. Hence, value-focused investors ought to take a close look at General Motors stock.
Is GM Stock a Buy, According to Analysts?
On TipRanks, GM comes in as a Moderate Buy based on eight Buys, five Holds, and two Sell ratings assigned by analysts in the past three months. The average General Motors price target is $50.53, implying 48.8% 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 (NYSE:JPM), with an average return of 14.9% per rating and a 65% success rate. Click on the image below to learn more.
Conclusion: Should You Consider GM Stock?
The market’s non-reaction to the UAW strike reveals a lot about how forward-looking investors can be. Most likely, financial traders understand that General Motors can withstand the strike, even if it persists for a while. Plus, no matter how you slice it, General Motors is a rock-solid company that isn’t too richly valued. Consequently, investors ought to consider GM stock.