General Motors (GM) shares have retreated from their year-to-date high of $87 in February to around $76, as the automaker prepares to release its second-quarter earnings on July 21. The pullback has formed a bearish double-top pattern and a flag pattern, suggesting further downside may be in store.
Deliveries Slip, but Market Share Holds
GM sold 714,896 vehicles in the second quarter, a 4% decline year-over-year. The company attributed the drop to a strategic deprioritization of electric vehicles and the discontinuation of models such as the Chevrolet Blazer and Cadillac XT4. Despite the decline, GM maintained its position as the top-selling automaker in the U.S. and ranked second in full-size pickup and large SUV sales. Brands like GMC, Chevrolet, and Cadillac continued to perform well.
Earnings Expectations and Valuation
Analysts project Q2 revenue of $47.09 billion, slightly below the $47.12 billion reported a year earlier. For the third quarter, revenue is expected to fall 0.44% to $48.38 billion. However, analysts anticipate a return to growth in the next fiscal year, supported by higher vehicle prices. According to Kelley Blue Book, the average new car price rose to $49,758.
GM's valuation already reflects many headwinds, 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's average of about 20. By comparison, Ford has a forward P/E of 8.68, and Stellantis trades at 7.13, making GM one of the cheapest major automakers despite strong profitability and cash generation.
The company still has $5.5 billion remaining under its existing buyback authorization, which management could accelerate to retire additional shares at depressed prices, boosting earnings per share and shareholder returns.
Analyst Views Mixed
Wall Street analysts have divergent outlooks. RBC's Tom Narayan lowered his price target to $94 from $95 while maintaining an outperform rating. JPMorgan's Ryan Brinkman raised his target to $110 from $98, and Citigroup's Michael Ward boosted his to $131 from $108.
Technical Outlook Points Lower
The daily chart shows GM stock has broken below the 23.6% Fibonacci retracement level of $77, a bearish signal. It has also formed a bearish flag pattern and fallen below the 50-day exponential moving average (EMA), indicating that sellers are in control. If the stock breaks lower after earnings, the next target is the 38.2% Fibonacci level at $70.
Investors should watch for a potential bearish breakout, though a strong earnings beat or an accelerated buyback could reverse the pattern. In the broader market context, Dow Gains 140 Points as Chip Stocks Rebound Ahead of Big Tech Earnings and Tesla Stock Nears Key Support as Xpeng Targets Model Y Ahead of Q2 Earnings highlight the mixed sentiment in the auto and tech sectors.
This article is for informational purposes only and does not constitute financial advice.
