Will General Motors See a Turnaround After Recent News?

| + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

With shares of General Motors (NYSE:GM) trading around $38, is GM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

General Motors designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It sells cars and trucks to dealers for consumer retail sales as well as to fleet customers in daily rental car companies, commercial fleet customers, leasing companies, and governments.

General Motors has dropped 6.6 percent in January after gaining 14 percent during the last three months of 2013. Ford (NYSE:F), on the other hand, has gained 6.1 percent this month, after dropping 8.5 percent during the last three months of last year. General Motors’ slump can be attributed to its sales announcement on January 3 when it missed forecasts by a mile. Now, however, Morgan Stanley’s (NYSE:MS) Adam Jonas and team think the stock looks “more interesting.”

They explain that, “We cut our estimates materially on the back of 2014 guidance provided at Detroit. Our adj. EBIT drops from $11.4bn previously (6.8 percent margin) to $10.0bn (6.1 percent margin), on lowered expectations in GMIO, GMNA, and GME. While 25 percent upside comes with high risk, we think GM is more interesting now. We think the new guide is appropriate given increasing competition and slowing growth in N America, operational and FX challenges in non-China EM and a new mgmt team setting the bar after 5 years of TARP compensation limitations. Following the guidance reset, we believe the company has slightly positive earnings revision risk. We also believe investor expectations for a share buyback are far lower following Detroit — finally. The challenge of owning GM is that the company is still in the early innings of executing its structural turnaround while the US auto cycle is approaching the later innings.”

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business