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faces some challenges in the transition to electric vehicles. That shouldn’t stop investors from buying shares though.
Morgan Stanley analyst Adam Jonas upgraded GM (ticker: GM) stock to Buy from Hold on Monday. His price target was raised to $38 a share from $35.
GM stock rose about 2.6% in premarket trading to $33.91, following the bullish call.
and
futures were flat.
Despite the call to Buy, Jonas still has concerns that the internal combustion engine business is like a melting ice-cube. The business is getting smaller over time as electric vehicles take more market share in the U.S. and around the globe.
Shrinking businesses make it difficult to maintain profit levels. What’s more, EVs aren’t profitable for GM, and the traditional auto industry yet. If EVs will ever be as profitable as traditional cars is just a guess.
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All those concerns are adequately reflected in GM’s stock, according to Jonas. Shares have fallen about 50% from an all-time high of more than $67 reached in January 2022.
The analyst’s ratings change also comes after better-than-expected first-quarter numbers reported April 25. GM reported adjusted operating profit of $3.8 billion. Wall Street was looking for operating profit of $3.2 billion.
Along with solid first-quarter numbers, management raised its financial forecasts for the full year. GM expects 2023 operating profit to fall between $11 billion and $13 billion. In January, the range was $10.5 billion to $12.5 billion.
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The average analyst price target didn’t move much with a $3 bump to Jonas’ target price. It is still about $46 a share, higher than Jonas’ $38 number.
The Buy-rating ratio changed. Now about 56% of analysts covering GM stock rate shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.
About a year ago, more than 80% of analysts covering GM stock rated shares Buy. Rising interest rates, a slowing economy and declining vehicle affordability, however, have sapped some enthusiasm for the shares.
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Investor enthusiasm has wavered too. Coming into Monday trading, GM shares have declined about 13% over the past 12 months. The S&P 500 has risen about 1% over that span.
Write to Al Root at allen.root@dowjones.com
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