Why General Motors’ Stock Could Experience a Strong Rally Soon

(Author’s note: This fundamental analysis is provided by a financial writer and portfolio manager.)

General Motors Co. (GM) has faced challenges in 2018, with its stock dropping almost 10% by March 19, while the S&P 500 index rose about 1.5%. However, market analysts remain optimistic about GM’s future, forecasting the automaker’s stock to climb approximately 30% to $48.35, according to data from YCharts.

Since early March, GM shares have been under pressure due to sluggish auto sales and investor concerns over the impact of new steel and aluminum tariffs on profit margins. Despite this, the stock may be undervalued, trading at just 5.8 times the projected 2019 earnings. Additionally, technical indicators suggest the stock is approaching a bottom. (See also: Trump’s Steel and Aluminum Tariffs: Key Insights.)

Data source: YCharts

Analysts Anticipate a Price Increase

Based on average price targets from YCharts, analysts expect GM’s share price to reach $48.35, representing a 30.6% increase from its closing price of $37.01 on March 19. Among the 25 analysts covering GM, 48% have issued "buy" or "outperform" ratings, 44% recommend "hold," and 8% suggest "underperform" or "sell."

Data source: YCharts

Attractive Valuation Levels

GM’s valuation has dropped significantly in recent weeks, with the stock currently trading near 5.9 times the anticipated 2019 earnings of $6.34 per share. The last time GM’s valuation was this low was August 2017, which was followed by a nearly 28% increase in the stock price.

Data source: YCharts

Technical Indicators Point to a Potential Bottom

Technical analysis indicates that GM shares may be nearing a bottom. A long-term upward trend beginning in August 2015 remains intact, and a strong support level exists around $35.50. These factors imply limited downside risk in the coming weeks, with a possible dip to approximately $35.50–$36, roughly a 3% decline.

The Relative Strength Index (RSI) has also shown signs of bottoming, hitting oversold levels near 30 three times since February. This RSI behavior could signal an emerging bullish divergence. However, confirmation requires the RSI trend to turn positive, signaling that the stock has truly found support. (See also: Divergences, Momentum, and Rate of Change.)

While short-term challenges may persist for GM, current indicators suggest the stock is poised for a positive reversal soon.

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and manages the firm’s actively managed, long-only Thematic Growth Portfolio. Kramer typically holds stocks for three to five years. For more details on Kramer’s background and portfolio holdings, click here. Information provided is for educational purposes only and does not constitute investment advice or solicitation. Investments carry risks and are not guaranteed. Consult a qualified financial or tax professional before implementing any strategies discussed. Upon request, the adviser will provide a list of all recommendations made in the past twelve months. Past performance does not guarantee future results.

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