General Motors' (GM) energy storage business is underappreciated by investors, while its US tariff exposure is improving, creating potential upside to earnings and valuation, RBC Capital Markets said in a note emailed Friday.
The analysts said that since Ford (F) unveiled its energy storage strategy in May, its shares have significantly outperformed General Motors', despite General Motors announcing its own battery energy storage system plans in June. This suggests investors may not yet be fully recognizing the earnings potential of the company's energy initiatives, the firm noted.
If the company can find success with sodium-ion batteries as a vertically integrated offering, similar to Tesla (TSLA) or Ford, as opposed to an off-take agreement like it is doing with its lithium iron phosphate cells, this business could be a key catalyst for multiple-re-rating, the analysts added.
Channel checks suggest General Motors' US tariff outlook is improving, the analysts said, adding that a reduction in Mexico tariffs from 25% to 15% could lower the company's estimated $3 billion tariff burden by about $500 million, while eliminating tariffs altogether could reduce it by roughly $1 billion.
RBC has an outperform rating and a $95 price target on General Motors.
Price: $80.89, Change: $+0.04, Percent Change: +0.04%