Diversity Isn’t GM’s Strength, Apparently

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General Motors analysts are squaring off into two camps, and it’s the pessimists that appear to be resonating in Monday’s market.

The automaker fell the most intraday since February after at least two analysts began questioning whether its core auto business can sustain profits. GM dropped as much as 5.3 percent in New York and was down 3.1 percent to $43.26 at 1:40 p.m.

The words of warning came from Goldman Sachs analyst David Tamberrino, who cited a peaking North American auto cycle in general and GM’s pickup changeover cycle in particular as factors influencing his downgrade from “sell” from “neutral.” Consumer Edge Research analyst Jamie Albertine, who didn’t downgrade the stock, signaled GM’s “strength of narrative” isn’t strong enough to support its premium at a time when U.S. vehicle sales are plateauing after a record seven years of growth.

The reality check from Wall Street caps off a period of growth for the automaker, which had climbed 28 percent this year through Friday amid a parade of analyst reports lauding its newfound technology chops. Bullish investors are betting that GM’s test fleet of self-driving electric cars can be converted into a lucrative robotaxi operation worth billions. A dimmer view says that advanced mobility businesses are a long way off and that profits from GM’s core business will suffer as vehicle sales slow in its home market.

“Though we appreciate the strides GM is making to position itself for ‘Auto 2.0,’ the next generation of shared mobility and autonomous driving, we believe the next step for EPS is down, not up,” Albertine wrote in a Monday note.

Tamberrino set a 12-month price target of $32, a dollar lower than its 2010 initial public offering price. Albertine said GM stock is probably fairly valued at $40 a share. Others have been raising their outlooks, with two analysts’ price targets as high as $55, data compiled by Bloomberg show. Longer term, Citigroup Inc.’s Itay Michaeli said GM has a “path to $134” with its strong core auto business complementing a robotaxi head start.

“We think people are too aggressive on the payback,” Albertine said in a phone interview Monday, noting that the market may be off on the timing of GM’s technology moves. “Racing to $50 a share is too generous in awarding a business that may not justify its valuation for seven to 10 years.”

 

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4 COMMENTS

  1. I am the highway
    https://www.hooktube.com/watch?v=cy2ZUGc2mSs

    Pearls and swine bereft of me
    Long and weary my road has been
    I was lost in the cities
    Alone in the hills
    No sorrow or pity for leaving I feel
    I am not your rolling wheels
    I am the highway
    I am not your carpet ride
    I am the sky

    Friends and liars don’t wait for me
    I’ll get on all by myself
    I put millions of miles
    Under my heels
    And still too close to you
    I feel

    I am not your blowing wind
    I am the lightning
    I am not your autumn moon
    I am the night
    The night

  2. Marketing dept: “HEY Lookout world! Self-driving cars are coming!”

    Clover: “Huh. Maybe I’ll hold the old car for a few years and see what happens…”

    Marketing dept: “It’s Ford Truck Month! Great deals!”

    Clover: “It’s always Ford Truck Month. And self-driving cars…”

    Millennials: “don’t look at me, I’m tapped out from college.”

    Old timers: “Never get me in one of those death traps! I’m keepin’ what I got until it or me is in the ground.”

    • Morning, RK!

      Leaving aside the technical and moral aspects of this, the money aspect is delusional. It seems as though almost everything that goes on today becomes a kind of Tulip Frenzy divorced from any economic reality. I repeatedly ask where the money will come from to put a $30,000-plus electric car in every person’s garage (or even a third the population’s garages)… the money for the fast-charging infrastructure, the money for new grid capacity, the money to replace/recycles these EVs at much shorter intervals (8-10 years vs. 12-15 for IC cars)… these are real, hard money issues that will have to be dealt with.

      Elon Musk can make money by rent seeking. The car companies can transfer costs onto others, fold losses into productive ventures – take advantage of bailouts. But most people have to generate productive income before it can be spent. There are limits to economic fantasy.

      I agree with DiLorenzo about the death spiral the car business is in; that what’s coming will, indeed, be “transformative.”

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