Home Stock Morgan Stanley downgraded this legacy automaker to ‘equal-weight’

Morgan Stanley downgraded this legacy automaker to ‘equal-weight’


General Motors Company (NYSE: GM) has been a nightmare for shareholders in recent weeks, with the stock down about 25% from its high in early January, and Morgan Stanley doesn’t expect much of a recovery in the coming months either.

Adam Jonas slashed price target to $55

In his note to investors on Tuesday, analyst Adam Jonas downgraded GM to “equal-weight” and slashed his price target to $55 that represents a 10% upside from here. Previously, Jonas had a PT of $75 on the stock.

Last week, General Motors guided for $15 billion in operating profit this year, which was below his expectations. Consequently, Jonas revised his full-year EPS estimate to $6.64 per share or 11% lower than his prior forecast.

The bearish call, however, is primarily related to the automaker’s push into electric vehicles that the Morgan Stanley analyst warns could result in negative CAGR in terms of revenue. He’s not happy about the pace at which GM is commercializing its self-driving business either.

Jim Lebenthal strongly disagrees

Cerity Partners’ Jim Lebenthal, however, strongly disagrees with the downgrade. The money manager saw a 4.0% decline in the stock price this morning as an opportunity to add to his position. On CNBC’s “Halftime Report”, he said:

GM is selling at 7 times earnings and that is assigning no value to Cruise, which now has paying customers in driverless taxis in San Francisco. It’s valuing BrightDrop at zero, which is already delivering electric vans to Fedex and now has Walmart signing up. There’s a lot of good things here.

Lebenthal sees a 25% increase in production at the company’s legacy business as a positive as well. In January, General Motors said it will spend $7.0 billion on EV and battery plants in Michigan.

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