General Motors Remains Undervalued. Should It Be?

General Motors (NYSE: GM) produced record adjusted earnings per share (EPS) of $7.07 for 2021, and management expects equally impressive results for 2022. Yet GM has lost 42% of its value year to date.

The markets are overacting to concerns over chip shortages and their impact on production. And despite the fact that production and sales of its most profitable vehicles have held up, GM remains the Rodney Dangerfield of automotive stocks, even as it expects to double revenue to $280 billion by the end of the decade.

So far, Wall Street isn't buying it. The concern is that inflation, rising interest rates, and a possible recession and its effects on increasingly cash-strapped consumers will torpedo demand. Such concerns plague all automakers, however, including Wall Street darlings Tesla and Rivian.

But even though General Motors appears well positioned in both autonomous vehicles and electric vehicles (EVs), it's not valued as highly by Wall Street.

Profits from software and deliveries

GM is first and foremost an automaker, and its growing line of EVs is becoming a launching point for other businesses. The new vehicles, such as the Cadillac Lyriq and GMC Hummer, depend heavily on software. And the company intends to exploit this to deliver cloud-based consumer services beyond driving, using its new Ultifi software platform, expected to launch on 2023 models.