At $77.12, GM trades near 6 times this year's guided earnings, which bakes in a fall in profits. Buybacks should still lift my 2027 earnings per share to about $14.50, but higher costs cap the multiple. Target $81.18, a hold.
Key points
- $13.25 a share: the midpoint of GM's 2026 adjusted earnings guidance puts the stock under 6 times earnings.
- 9% fewer shares: buybacks cut the diluted share count to about 866 million in a year.
- $1 billion to $1.5 billion: extra cost pressure for 2027 if recent commodity and memory-chip inflation persists.
The call
The price assumes GM's profits shrink. At 5.8 times this year's earnings, investors are paying for a business they think will fall well below $15 billion of adjusted operating profit. The October 20 drop of about 7% came from the cost warning, not from the quarter, which beat on margin and cash.
Diluted shares, reported and my forecast (millions)GM 10-Q/10-K XBRL; Q4 FY25 n/a (loss); forecasts mine, Oct 20, 2026
I think profits dip a little and per-share earnings still grow. I take 2027 adjusted operating profit at $14 billion, down from about $15 billion, because truck output stays flat during the pickup changeover and costs rise. About $9 billion of buybacks shrinks the share count faster than profit falls. That gives earnings of about $14.50 a share.
12-month value at my 2027 EPS of $14.50, by price-to-earnings multiple ($)My arithmetic, Oct 20, 2026; price $77.12
Valuation
| Step | Figure |
|---|
| 2027 adjusted operating profit (mine) | $14 billion |
| 2027 adjusted net income | $11.4 billion |
| Average 2027 diluted shares | 772 million |
| 2027 earnings per share | $14.50 |
| Multiple (price to earnings) | 5.6 times |
| 12-month target | $81.18 |
Detroit carmakers have rarely held more than 6 times earnings near a cost squeeze, so I keep 5.6 times. The upside is buybacks funded by about $12 billion of yearly free cash flow. The downside is a downturn, which would cut the multiple and earnings together. That balance is a hold.
Risks
- A slide in US car sales below 15.5 million a year would hit truck pricing. Watch monthly sales and incentive spending.
- Commodity and memory costs could top the $2 billion GM has flagged. Watch the January 2027 guidance.
- Auto-loan losses at GM Financial could rise. Watch its quarterly loss provision, now $340 million.
What would change my mind
January guidance for 2027 adjusted operating profit above $15.5 billion would make this a buy, and guidance below $13 billion a sell.