General Motors (GM 1.46%) stock is stalled.

Up just 1% over the past year (against a market that's up 9%), GM stock has actually declined in price by more than 4% since 2016 began. And yet, this morning, one banker is arguing that investors aren't giving this century-old company enough credit for its staying power -- or for its profits, free cash flow, or cheap stock price, either.

Bright and early Monday morning, analysts at Morgan Stanley announced they are upgrading shares of General Motors from equal weight to overweight (i.e., from hold to buy), and assigning the shares, which currently cost less than $32, a new $37 price target.

Here are three things you need to know about that.

Suddenly, Chevrolet is back in style! Image source: Getty Images.

1. Fear gauge enters the red zone

Why is GM stock down in the dumps? In part, it's due to a rising tide of pessimism about the future of the automotive market in general. Last month, as my fellow Fool John Rosevear reported, GM sales were down 5% year over year. (Don't laugh, Ford (F 2.21%) fans. Your sales numbers were down 8%.)

In fact, Ford has been warning for some time now that the automotive market has pretty much plateaued, and is due to see a decline in sales next year.

2. Fear not, says Morgan Stanley

Even if that's how things play out, though, Morgan Stanley doesn't feel it's necessarily time to head for the exits. As explained in a write-up this morning on, Morgan Stanley "believes even flat earnings in 2017 and 2018 would be received as a positive surprise by the market."

Currently, analysts quoted on S&P Global Market Intelligence are predicting a 4% earnings decline this year, followed by a smaller 2% slip in 2017. 2018 earnings, although expected to rise from 2017 levels, are still expected to fall slightly below 2015 earnings of $5.91 per share. (For context, these same analysts say that Ford's earnings will decline this year, but then returning to growth as early as 2017). Morgan Stanley, meanwhile, thinks General Motors will surprise folks with earnings as much as "5% above consensus" -- delivering a positive earnings surprise sufficient to jolt the stock out of its doldrums.

3. Playing the long game

Longer term, too, Morgan Stanley thinks investors are giving General Motors too little credit for its staying power, and for this automaker's ability to "explore new business structures with the potential of positive values," and evolve its business as market conditions dictate. Even if automotive earnings plateau, or even decline slightly in the short term, they'd have to fall by more than half to return General Motors stock to its historical average valuation of about 10 times earnings.

So far, few analysts are predicting any downturn quite that drastic. Indeed, Morgan Stanley argues that General Motor's strong earnings and free cash flow could continue flowing for far longer "than the market is currently discounting." (The threat from self-driving cars, too, while real, could take a lot longer to impact General Motors' business than many futurists hope for.)

The most important thing: Valuation

So what does all of this mean to investors, in dollars and cents? Priced at just 5.8 times earnings today, Ford Motor stock is really, really cheap -- cheap enough that the company's 4.9% dividend yield covers nearly the entire P/E, all on its own. By the same token, at just 4.1 times earnings, General Motors stock is even cheaper than Ford's -- and GM pays an equivalent dividend.

Unless you think there's some serious financial Armageddon about to rain down on the entire automotive industry -- a possibility that no one on Wall Street is yet predicting -- these two stocks are too cheap to ignore. But if you had to pick just one, well, in that case, GM stock is currently the cheapest.

And Morgan Stanley is right to recommend it.