General Motors stock has retreated in recent days, falling from its year-to-date high of $87 in February to about $76 today. The pullback could continue in the near term after the stock formed a bearish double-top pattern ahead of its second-quarter earnings report.
General Motors to publish earnings on July 21
GM stock will be in the spotlight this week as it releases its financial results. These numbers come after the company published a soft deliveries report. It sold 714,896 vehicles in the second quarter, down by 4% from the same period last year.
GM blamed the decline on its decision to deprioritize electric vehicles. It also discontinued some vehicles, including the Chevrolet Blazer and Cadillac XT4.
Despite the decline, GM maintained the number one market share in the US. It was also the number 2 company in full-size pickup and large SUV sales. Key brands like GMC, Chevrolet, and Cadillac did relatively well.
Yahoo Finance data shows that analysts expect its Q2 revenue to come in at $47.09 billion, down modestly from the $47.12 billion it made in the same period last year. For the third quarter, analysts expect that revenue will drop by 0.44% to $48.38 billion.
On the positive side, analysts are optimistic that GM will return to growth in the next financial year. Also, while its revenue will remain under pressure, analysts believe that its profitability will do well, helped by higher vehicle prices. A recent report by KBB noted that new car prices rose slightly, with the average new car selling for $49,758.
Another positive is that GM’s valuation already reflects many of its growth challenges, including tariffs, rising input costs, and slowing earnings momentum.
The stock trades at a forward price-to-earnings ratio of just 5.95, well below the S&P 500 Index’s average multiple of about 20, suggesting much of the pessimism is already priced in.
By comparison, Ford trades at a forward P/E of 8.68, while Stellantis has a multiple of 7.13, making GM one of the cheapest major automakers despite its strong profitability and cash generation.
Therefore, GM could choose to accelerate its share repurchase program. The company still has $5.5 billion remaining under its existing buyback authorization and may take advantage of its depressed valuation to retire additional shares, further boosting earnings per share and shareholder returns.
Analysts have mixed views about GM stock. RBC’s Tom Narayan lowered his target to $94 from $95, while maintaining an outperform rating. JPMorgan’s Ryan Brinkman hiked his target from $98 to $110, while Citigroup’s Michael Ward boosted from $108 to $131.
General Motors stock technical analysis
The daily chart suggests that the GM stock may drop further in the coming weeks. It has already dropped below the 23.6% Fibonacci Retracement level of $77. Moving below that level may suggest that the stock has more downside to go.
The stock has also formed a bearish flag pattern, which is made up of a vertical line and an ascending channel. It has also dropped below the 50-day Exponential Moving Average (EMA), a sign that bears have largely prevailed for now.
Therefore, the stock will likely have a bearish breakout after releasing its earnings on Tuesday. If this happens, the next target to watch will be the 38.2% Fibonacci Retracement level of $70.