UBS advised to buy General Motors shares. Why does the analyst expect them to grow by 35%?

UBS has improved the rating of shares of automaker General Motors and now advises to buy them, and also predicts their growth by almost 40%. According to the analyst, the owner of Chevrolet and Cadillac brands will be able to offset the pressure of duties and will benefit from a possible reduction in Fed rates, a new investment cycle and easing of environmental regulations. Since the beginning of the year, GM's market value has nearly caught up with the S&P 500 index after fluctuating amid the White House's trade policies.

UBS analyst Joseph Spak raised his rating on General Motors from Neutral to Buy and his target price from $56 to $81, CNBC reports. Spack's new target implies a 35% increase in the company's market value from its closing level on September 24. The analyst noted that the company's stock is undervalued: its price to projected earnings ratio is only 6, which is within the lower end of the historical range of 5 to 8.

The analyst recalled that U.S. import duties cut GM's margins by about 3% last quarter. "While the duties have added costs that GM will not pass on to consumers, we believe the company has a number of levers to offset these pressures," Spak noted in Barron's outline. He added that the automaker would be able to offset the losses with U.S. President Donald Trump's likely duty cuts for Mexico and South Korea.

UBS's forecast for GM's earnings for 2026 and 2027 was higher than the Wall Street consensus, Barron's reports. The analyst's baseline scenario assumes that the company's North American business margin will recover to 7.8% as early as 2026 against the consensus of 6%, while the optimistic scenario assumes a recovery to 9-11%.

UBS also emphasized that GM's prospects are not only related to duties: the company could benefit from lower Fed rates in the U.S., a new investment cycle and relaxations in environmental regulations. The Trump administration is proposing to repeal a key greenhouse gas endangerment rule, which would effectively lift federal restrictions on emissions, Barron's noted. Environmentalists warn of serious consequences, but for GM it means savings on buying green credits. UBS estimates that a final decision could be made by the end of the year.

"Combined with a strong free cash flow profile, a capital allocation policy that can support share repurchases, and low valuation, we see positive momentum for the stock," Joseph Spak said in a note cited by CNBC.

In trading on September 24, GM shares jumped 2.3% (to $59.9), breaking a series of three-day decline. Quotes rose to their highest level since December 2024. The automaker's stock has lagged the market for most of this year amid the Trump administration's wavering trade policies, but it has gained 21% in the current quarter. Now compared to the beginning of 2025, GM's market value is up 12.5%, while the S&P 500 has added 12.9% over the same period.

This week two more investment banks - Mizuho and Citi- increased their target prices on General Motors shares. The first one raised the target price from $58 to $67 (12% higher than the last close), and the second one - from $61 to $75 (25% higher). Both reiterated buy tips on the securities (Outperform and Buy ratings). A Citi analyst noted that despite the automaker's vulnerability to trade risks, the company was able to successfully offset the impact of duties.

The securities have a total of 17 GM buy recommendations (13 Buy and four Overweight), 10 Hold recommendations and two Sell recommendations, according to MarketWatch. The Wall Street consensus target price is $60.17 per share, only slightly above current levels.

This article was AI-translated and verified by a human editor