General Motors Gets $132 Price Target

TD Cowen has once again reiterated its Buy rating for General Motors (NYSE: GM), along with a price target of $132, citing that the company's software and service business will be a key earnings driver in the coming years. The price target is toward the top range of analyst targets at the moment, while 14 analysts have increased their earnings targets for the next period for General Motors.

The view at TD Cowen is that General Motors is venturing into a new world where it is not limited by the old vehicle business.

Software Could Deliver More Than $5 Billion in Earnings

As per TD Cowen, General Motors software and services’ margin contribution to the earnings before interest and taxes could almost double to 30% by 2032. It would amount to more than $5 billion in EBIT.

The prediction considers the revenues from services such as OnStar and Super Cruise. Development of connected vehicles and advancements in driver assistance systems should boost the growth.

TD Cowen mentioned two key catalysts for the growth opportunity.

The first one is the introduction of the SDV 2.0 platform of General Motors in 2028. It is said that the next-gen platform will feature a revamped Super Cruise system and Level 3 autonomy.

The second catalyst is the addition of new vehicle capabilities through software updates. In particular, TD Cowen pointed at the Gemini software update recently introduced by GM as an example.

Strong Cash Flow Supports the Investment Case

The valuation by TD Cowen at $132 is predicated on an expected 2027 free cash flow yield of 9%. But according to the company, the valuation is not enough to take into consideration possible opportunities that might arise after 2028.

General Motors' current free cash flow yield is approximately 19%, and the company's stocks have risen by about 65% in the last year. But according to InvestingPro analysis, the stocks are trading above their fair value estimate.

Moreover, TD Cowen has designated General Motors as its number one pick among the automotive companies.

Recent Results Strengthen GM’s Position

General Motors’ most recent quarter was a great one, with revenue being $48 billion and EPS standing at $3.57, beating analysts' expectations of $46.6 billion and $3.19 respectively.

There were also increases in wholesale vehicle deliveries of about 2% year over year to about 990,000 vehicles.

Following the financials, Mizuho reiterated its Outperform rating and a target price of $100, while RBC Capital increased its price target to $100 for the company due to pricing power and cost discipline. Jefferies changed the stock rating to Buy and raised its price target to $99 due to its belief in GM’s 2027 view. TD Cowen increased its price target to $132.

Overall, this shows that the investment thesis around GM revolves around both car sales and the software side of the business.