GM stock price has become overbought: is it a buy as Wall Street pros predict?
The GM stock price has been in a strong bull run this year and is beating most companies in the S&P 500 Index by far. General Motors has jumped by nearly 55% this year, bringing its market capitalization to over $75 billion.
General Motors’ business is doing well
A few months ago, there were concerns about General Motors and other American automakers after Donald Trump announced his reciprocal tariffs.
The tariffs meant that importing key raw materials was always expensive as the US still has limited resources.
These fears explain why the GM stock price plunged to $47 in April once the tariffs took effect.
Less than a year later, the stock has jumped to a record high, its sales are doing well, and Wall Street analysts are highly bullish on the company.
This optimism was because Donald Trump negotiated trade deals with most countries, including those in Europe and in China. He has also eased the auto tariffs he implemented. For example, vehicles assembled in the US can now qualify for partial reimbursement on parts-related levies.
Additionally, auto manufacturers can receive offsets equal to 3.75% of MSRP for vehicles assembled in the country.
The most recent results showed that the company’s revenue stood at $48.5 billion in the third quarter of the year, while its net income dropped by 56% to $1.32 billion as the company adjusted to the new era of Trump’s tariffs.
GM made over $139 billion in the first nine months of the year, with its net profit falling to $7.3 billion.
Analysts are optimistic about the GM stock
Wall Street analysts are highly upbeat about the GM stock, citing the ongoing execution by the management.
The average estimate among analysts is that the company’s annual revenue will drop by 0.91% this year to $185 billion. They also expect the company to return to growth in the coming years, reaching $186.53 billion.
Most importantly, analysts expect the company’s annual earnings per share to improve from $10.28 this year to $11.57 next year.
The company is benefiting from several key catalysts, including its focus on high-margin trucks and the fact that the management has scaled back its investment in the electric vehicle industry.
In a recent note, analysts at Morgan Stanley upgraded the company’s stock forecast to $90 from the previous $54. The analyst pointed to the company’s capital discipline and the favorable mix of trucks.
Goldman Sachs analysts maintained their buy rating, while Evercore ISI, Tigress, and Citigroup analysts maintained their bullish outlooks.
However, the risk is that the current stock price is in line with the average estimate by top Wall Street analysts, a sign that it may have limited upside.
The other risk is that the company has become highly overvalued, with the current forward PE ratio of 6.8 being higher than the 4.8 it had in the same period last year. Its PEG ratio of 1.85 is also quite high.
GM share price technical analysis
The weekly timeframe chart shows that the GM stock price has been in a strong uptrend since it formed a double-bottom pattern $29.06 in July 2022 and November 2023.
A double bottom is one of the most popular bullish reversal signs in technical analysis. It has now moved above the key resistance level at $60.53, its highest point in November last year, and $64.72, its January 2022 high.
The stock has moved above all moving averages, while top oscillators show that the stock has become highly overbought.
Therefore, the most likely scenario is where the momentum continues in the near term as bulls target the psychological level at $90. However, there is a risk that it will suffer a harsh reversal in 2026 as bears target the next key support level at $64.72. Such a move would be a 20% drop below the current level.
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