On Monday, General Motors Co (NYSE:GM) shares edged lower 1.27% on news the company is halting Chevy Bolt EV production. The company is pausing production of the 2022 Bolt and Bolt EUV until mid-September when it is confident the new batteries from LG Chem Ltd (KRX:051910). are without defects.
GM’s latest announcement comes a few weeks after spending more than $2 billion in recalls related to battery fires. The company CEO Mary Barra said the recalls would not prevent it from working with LG on more EV batteries in the future.
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General Motors shares are still up more than 21% this year despite falling more than 21% since the start of August. The company reported promising EV sales for Q2 after increasing more than 335% from the same quarter a year ago.
The company said it plans to launch more than 30 EV models globally by the year 2025, making it one of the largest EV makers in the world.
Why investors shouldn’t worry about halting Bolt EV production
Although GM is pausing production of the 2022 Bolt and Bolt EUV, it plans to resume production in a few weeks, thereby minimizing the impact on sales. Moreover, the company also has more EVs lined up for a launch this year, including Hummer EV and Hummer EV SUV will come later this year, the Cadillac Lyriq and the Celestiq.
Therefore, GM’s EV pipeline is about to get busier, boosting its EV sales potential. It seems poised to remain on course to achieve its 2025 goal, meaning the current sales and earnings projections will still be achievable.
From a valuation perspective, trade at an attractive P/E ratio of 5.76, making the stock a compelling opportunity for value investors. Moreover, analysts forecast GM’s earnings per share to grow at a compound annual rate of about 13% over the next five years. Therefore, growth investors could also show interest.
General Motors shares may have bottomed
Technically, General Motors shares appear to have bottomed just below the $50.00 per share level. Moreover, the stock price recently bounced off oversold conditions of the 14-day RSI, creating a perfect opportunity to buy.
Therefore, investors can target extended gains at about $52.89 or higher at $57.96, while the $45.29 and $40.14, levels provide crucial support.
Bottom line: GM shares look substantially undervalued
In summary, General Motors shares look significantly undervalued at 5.76 P/E after declining more than 15% over the last four weeks. In addition, the stock trades several levels off overbought conditions, creating a perfect opportunity to buy.
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