Analysts adjust GM stock price target ahead of earnings

Here's what could happen next to GM shares.

Apr 12, 2024 - 06:30

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Analysts adjust GM stock price target ahead of earnings

General Motors (GM) is thinking big.

The automaker's mission is outlined on its X, formerly Twitter, account: "We’re on a journey to create a world with zero crashes, zero emissions, and zero congestion."

Lofty goals, no doubt, but there have been some detours along that three-zero highway.

New vehicle sales in the U.S. rose 5.1% from January through March, the Associated Press reported, but electric vehicle sales growth slowed during the first three months of the year.

EV sales grew only 3.3% to nearly 270,000 during the quarter, well below the 47% growth that fueled record sales and a 7.6% market share last year.

Nearly all early adopters and people concerned about internal combustion engines’ impact on the planet have bought electric vehicles. Now, Edmunds Director of Insights Ivan Drury told the AP that automakers are facing more skeptical mainstream buyers.

“That’s where all of those headwinds come in that we’ve seen in survey data,” he said. “Those real-world concerns about charging infrastructure, battery life, insurance costs.”

GM's CEO Mary Barra acknowledged this issue in January when she told analysts during the company's earnings call that "the pace of EV growth has slowed, which has created some uncertainty."

The company's self-driving vehicle Cruise recently returned to action after its permit to test and operate driverless vehicles was pulled in California.

General Motors settled its union strike in 2023, but still faces headwinds.
Bloomberg/Getty Images

General Motors faces concerns about electric vehicles

Cruise will resume operations in the United States with a small fleet of human-driven vehicles in Phoenix, Arizona.

“This work is done using human-driven vehicles without autonomous systems engaged, and is a critical step for validating our self-driving systems as we work towards returning to our driverless mission,” Cruise said in a blogpost.

In January, Barra told analysts that GM had begun to "implement significant changes" to build a better Cruise, adding that "we are committed to earning back the trust with our regulators and the public through our actions."

She said that spending will be down considerably this year, but GM "will continue to invest in the people who are advancing the software, specialized hardware, and AI capabilities."

"We are committed to Cruise," Barra said. "When we look at the technology, the foundational technology is sound. You know, we had already demonstrated and validated externally that Cruise technology is already safer than a human driver."

Barra said the company’s priorities were “to maximize the opportunities we have with our winning ICE portfolio, grow our EV business profitably, deliver strong margins and cash flow, and refocus and relaunch Cruise.”

Wall Street analysts have been examining GM, the company founded in 1908, as it prepares to report quarterly earnings.

Barclays raised the firm's price target on General Motors to $55 from $50, while keeping an overweight rating on the shares.

The firm downgraded its sector view for U.S. autos and mobility to neutral from positive.

While carmaker stocks should continue outperforming, the firm told investors in a research note that demand cycle and electric vehicle risks remain.

For suppliers, Barclays believes the challenges of a flat light vehicle production environment with customer mix and margin difficulties "pose a significant overhang, which may take time to clear."

GM CEO Barra: 'We learned a lot'

General Motors is scheduled to release its first-quarter earnings on April 23, and analysts expect the carmaker to earn $2.12 on $40.7 billion in sales.

GM reported fourth-quarter earnings of $1.24 per share, compared with $2.12 a year earlier, beating the FactSet consensus of $1.17.

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Revenue totaled $43 billion, essentially flat compared with $43.1 billion a year ago, and coming in ahead of FactSet’s call for $38.64 billion.

"We learned a lot in 2023, and those learnings are helping us build our strengths and addressing our challenges," Barra said.

Morgan Stanley raised the firm's price target on GM to $46 from $43 while keeping an overweight rating on the shares.

The firm wanted to "mark to market" its GM model ahead of the first-quarter earnings report.

Morgan Stanley noted that it doubled anticipated fiscal year impairment charges to S3 billion from $1.5 billion previously, trimmed capital expenditure expectations to the low end of guidance, and raised its earnings per share forecast by 9% to $9.04 from $8.30 previously.

While the firm reiterates an overweight rating on GM and calls the EV slowdown "positive for GM," it highlights "Top Pick" Ford (F) as its preferred U.S. automaker.

Meanwhile, Ford cut prices of some variants of its F-150 Lightning electric pickup truck by as much as $5,500, Reuters reported, as it navigates the competitive EV market.

Ford's XLT variant will cost $2,000 less at $62,995, while the Lariat variant will now be down 3.14%, carrying a suggested price of $76,995. Prices for its PRO and Platinum variants remain unchanged.

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