A UBS Upgrade Has Sent GM Shares Higher. According to the Firm, the Stock is Cheap and There Will Be a Big Rally

UBS has taken a more bullish stance on General Motors (GM), upgrading the automaker’s shares to buy from neutral and lifting its price target significantly. The firm now sees GM reaching $81 per share, up from its prior target of $56 a move that implies nearly 40% upside from Tuesday’s closing price.

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The investment bank also highlighted that its earnings outlook for GM over the next two years is considerably stronger than Wall Street’s broader consensus.

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UBS analyst Joseph Spak noted that while tariffs have created headwinds, GM is positioned to absorb these costs without passing them on to consumers. Instead, the automaker can pull from multiple levers to balance the added expense.

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“Tariffs have raised costs that GM won’t shift to buyers, but the company has strategies to offset this pressure,” Spak explained. “Coupled with a healthy free cash flow profile, a shareholder-friendly capital allocation policy, and an attractive valuation, GM shares are set up for meaningful upside.”

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Following UBS’s upgrade, GM stock climbed 2% in an otherwise flat session. For much of the year, the automaker has lagged behind the broader market, weighed down by uncertainty surrounding trade policies under the Trump administration.

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Still, momentum has improved in recent months. GM is up 21% this quarter, bringing its year-to-date gain to 12%. The bounce reflects improving investor sentiment as the company shows resilience despite ongoing tariff concerns.

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UBS pointed out that GM reported tariffs had trimmed its profit margins by around 3% last quarter. However, the firm believes this drag could ease in the near future. Potential tariff relief from the U.S. administration particularly regarding Mexico and South Korea may lighten the load on GM’s operations.

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Additionally, lower emissions standards are expected to reduce regulatory compliance costs, including expenses related to credits. This shift could provide another margin tailwind, helping GM maintain profitability even in a challenging global trade environment.

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One of the most compelling aspects of UBS’s bullish case is valuation. GM currently trades at a forward price-to-earnings (P/E) ratio of just 6, based on earnings estimates for the next 12 months. That places the stock at the low end of its historical range of 5 to 8 times earnings, making it look inexpensive compared to both its past averages and broader market multiples.

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For long-term investors, such a valuation suggests the market may be undervaluing GM’s earnings power, especially as cost pressures moderate and free cash flow remains strong.

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Beyond tariffs and valuation, UBS also flagged macroeconomic factors that could work in GM’s favor. If the Federal Reserve follows through on rate cuts, borrowing costs would decline, making auto financing more affordable for consumers. This could stimulate new car demand, providing another potential boost to GM’s sales outlook.

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Taken together, UBS’s analysis paints GM as a company that is navigating headwinds effectively while maintaining solid fundamentals. Its ability to absorb tariff-related costs, paired with potential policy relief and an unusually low valuation, sets up a constructive backdrop for the stock.

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Investors have been hesitant toward automakers in recent years, viewing them as highly cyclical and vulnerable to trade policy uncertainty. But UBS’s upgraded outlook suggests that GM may be more resilient than the market gives it credit for. Strong free cash flow, shareholder-friendly policies such as buybacks, and cost-saving opportunities all add to the investment case.

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With the shares still trading near historical valuation lows and the potential for upside catalysts on the horizon, UBS believes GM offers an appealing entry point for investors seeking growth at a discount.

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