Key points:
- GM stock dropped 5% on downgrade from Morgan Stanley, price target cut to $55 from $75
- Analyst Adam Jonas points to a ‘less clear path to realization'
- The firm is also concerned about the companies transition from ICE to EV
Far from the fledgling underdogs with bold promises; GM (NYSE: GM) is a US staple of automobile manufacturers. The companies long and lucrative history earned them the medal for the U.S’s largest car manufacturer – but like all royalty, the reign can’t last forever. Biting at the heels of GM, the EV transition has thrown the companies position slightly off-kilter- with investors wondering whether the company is a little late to the show.Â
Ford’s hotly-received F-150 EV absolutely smashed GM’s pickup sales in January, and although GM’S new factory with Foxconn is underway, the distance from the market leaders seems to be increasing.
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Analyst Adam Jonas from Morgan Stanley also made a note of particular concerns facing GM investors – downgrading the stock to Equal Weight from Overweight with a price target of $55, cut from $75. Jonas refers to GM’s ‘less clear path to realization’ as a critical concern for the firm, following the company’s fiscal 2022 guidance that came in below estimates.Â
Jonas’ shift in valuation methodology from sum-of-the-parts to discounted cash flow has driven the firm’s price cut – with expectations that the company will remain as a sole company for the coming year at least.
Lastly, Morgan Stanley stated concerns over the company’s shift from the traditional internal combustion engine to electrification. As more and more manufacturers embark on the transition, we can expect to see shifts in revenue and expectations as companies attempt to stay prominent in a changing market.
