General Motors: Structural Transformation Underway And Undervalued (Q1 Earnings Preview)
General Motors is undergoing a significant structural transformation, with its high-margin connected services like OnStar and SuperCruise expected to drive future profits. The company's deferred revenue from subscriptions is projected to reach $7.5 billion in FY26, contributing to a sum-of-the-parts valuation suggesting 31.7% upside. Despite these developments, GM's stock remains undervalued, as the market has yet to fully recognize the potential of its connectivity segment. The author maintains a bullish outlook ahead of Q1 earnings.
- ▪General Motors' connected services, including OnStar and SuperCruise, are projected to generate $7.5 billion in deferred revenue for fiscal year 2026.
- ▪The connectivity segment boasts gross margins of approximately 70%, significantly higher than traditional automotive operations.
- ▪A sum-of-the-parts valuation estimates GM's equity value at $92.75 billion, compared to its current $70.4 billion market capitalization.
- ▪The author believes GM stock is undervalued due to market underappreciation of its high-margin, recurring-revenue technology services.
- ▪The analyst may initiate a long position in GM stock or related derivatives within the next 72 hours.
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