Shares of General Motors (GM -0.04%) plummeted in the early days of the COVID-19 pandemic last year, reaching an all-time low of $14.33 in mid-March. Clearly, investors feared that the pandemic would crush auto demand for the foreseeable future, decimating GM's profitability.

Reality was quite a bit different. There were temporary headwinds, to be sure. General Motors had to halt North American production for about two months last spring, and auto sales slumped during that period, due to widespread stay-at-home orders. However, demand bounced back quickly as the economy reopened, allowing GM to earn a huge profit in the third quarter. Domestic sales trends improved further in Q4. As a result, GM stock has surged. Last week, it hit a new all-time high, surpassing $50 for the first time ever.

GM Chart

GM stock performance, data by YCharts.

Despite this big comeback, GM stock remains extremely cheap. Considering that the General's core business is firing on all cylinders and the company is investing aggressively in long-term growth opportunities, there's plenty of upside left for long-term investors.

Strong demand for key products

High demand for full-size trucks and SUVs drove GM's rapid recovery in the second half of 2020. Combined domestic deliveries of the Chevy Silverado and GMC Sierra full-size pickups slipped just 3% year over year in the third quarter despite extremely low inventory. In the fourth quarter, GM's U.S. full-size truck sales returned to growth, surging 11% year over year. GM also posted an impressive 25% jump in domestic deliveries of its full-size SUV models last quarter.

These sales results suggest that demand for these models is extremely strong. After all, dealer inventories remained very low by historical standards throughout the fourth quarter, likely weighing on sales. Furthermore, retail deliveries grew even faster than the fleet business, which tends to be a bit less profitable. And GM only began shipping the all-new versions of its full-size SUVs to dealers in October.

Full-size trucks and SUVs drive the bulk of GM's earnings today, typically producing unit profits of $10,000 or more. This profit stream is likely to grow over the next few years, as General Motors maximizes output at its existing truck and SUV factories and adds production capacity with the opening of a new full-size truck plant in Canada next year. That could drive GM's profits to new highs.

A white Chevy Silverado on a dirt road, with a green field in the background

Image source: General Motors.

Plenty of innovation in the pipeline

The company's strong financial results have certainly contributed to GM stock's recent rise. However, growing optimism about the top U.S. automaker's future product pipeline may be the main thing propelling the stock higher.

For example, General Motors is reinventing some of its iconic products as electric vehicles to capture new growth opportunities. It is bringing back the HUMMER nameplate as a GMC sub-brand, starting with a performance truck. The 2022 "Edition 1" model sold out in 10 minutes last month. In the same vein, GM is considering turning Corvette into a sub-brand within Chevrolet, complementing the existing sports car with an electric crossover.

GM also announced the launch of a new business, BrightDrop, at the Consumer Electronics Show last week. BrightDrop will start by selling a motorized pallet (to assist with warehouse logistics and last-mile deliveries) and an electric delivery van. The business is developing other products to complement these offerings for the logistics market. It will also offer a variety of cloud-based fleet management services.

Finally, General Motors is investing heavily in its Ultium battery platform and its Cruise autonomous vehicle subsidiary. It is working hard to drive down Ultium battery costs while improving performance. Meanwhile, Cruise finally got approval to begin testing its autonomous vehicles without safety drivers in San Francisco late last year, putting it one step closer to commercializing its technology.

A Chevy Bolt EV equipped with Cruise's autonomous driving systems in a factory

Image source: General Motors.

GM stock is just getting started

The U.S. stock market has surged to new highs over the past year. The S&P 500 trades for more than 25 times forward earnings. High-growth EV specialists trade at much loftier valuations. Meanwhile, even after its recent surge, GM stock trades for less than nine times forward earnings.

This rock-bottom valuation might make sense if GM's business were in secular decline, or if earnings appeared to be near a cyclical peak. However, General Motors is aggressively preparing itself to remain near the top of the global auto industry as EV adoption takes off. Moreover, it just weathered a big global economic downturn with no ill effects.

Obviously, the auto industry is a tough business and there's no guarantee that GM will be successful in the long run. Nevertheless, investors aren't giving the company enough credit. As General Motors provides more proof of its long-term growth potential in the years ahead, GM stock could easily double or triple -- or more.