GM - General Motors - analyst downgrade & target reduced by Morgan Stanley
Updated Feb. 8, 2022 9:15 am ET / Original Feb. 8, 2022 9:12 am ET
Shares of General Motors were falling Tuesday after the car maker caught a downgrade
from Wall Street. Morgan Stanley analyst Adam Jonas has concerns about GM’s
ability to transition to an all-electric future.
GM stock was down 4.3% at $48.55 in premarket trading Tuesday.
Jonas cut his rating to the equivalent of Hold from Buy. His price target went to $55 from $75 a share.
The downgrade might sting a little for anyone upbeat about GM stock. Jonas had rated GM shares at Buy since April of 2018, when GM stock was at about $38. The company didn’t immediately respond to a request for comment.
Before the downgrade, Jonas was valuing GM stock on a sum-of-the-parts basis. To come up with a target price, he was assigning separate values to all of GM’s separate operations, such as the Cruise autonomous driving unit, the EV operation, and the potential for GM to develop a battery-supply business, as well as the legacy gasoline-powered car business.
That sum-of-the-parts story is “pushed out,” wrote Jonas in his Tuesday report. Now he expects GM to remain “one holistic company” for the coming 12 to 18 months, so it makes less sense to value the parts separately.
The valuation change is one thing, but Jonas also harbors “concerns” about GM’s ability to transition to an all-electric world. He cut his forecasts for sales growth out to 2030 as a result.
A third factor behind the ratings change was weaker than expected 2022 financial guidance. GM reported solid fourth-quarter earnings last week, but the outlook for 2022 was clouded by supply-chain issues and cost inflation. As a result, Jonas cut his estimate for 2022 per-share earnings to $6.64 from $7.49.
With the downgrade, 88% of analysts covering GM stock rate shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.
The average analyst price target is about $76. The downgrade pushed it lower by about $1. Coming into Tuesday trading, GM stock was off about 14% year to date.
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