General Motors Company (GM) Stock Trading At 10.5% Discount: Citi
General Motors Company (GM) Stock Trading At 10.5% Discount: Citi
Citi analysts believe General Motors Company stock should trade higher; boost price target to $50
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Published: Mar 10, 2015 at 1:18 pm EST
In a report published Tuesday, Citi lifted its price target on General Motors Company (NYSE:GM) stock by $1 to $50, and reiterating a Buy rating. The sell-side research firm also revised its earnings estimates upward for the company, following a $5 billion stock buy-back announcement by the auto giant.
The sell-side firm endorsed its prior view that GM stock will be trading at a premium to Ford Motor Company (NYSE:F) stock during 2015. Citi analyst Itay Michaeli noted: “With capital allocation in place, GM’s earnings and overlooked progress should start to matter far more now.” He emphasized Citi’s earnings forecast for GM is still below the company’s own guidance.
Mr. Michaeli argues that there is no justification for GM trading at 7.7x 2016 Price to Earnings (P/E) ratio, when Ford trades at 8.6x. He based this question on the market consensus about General Motors’ earnings, and not on Citi’s estimates, which are 10% higher than the Street’s view.
While commenting on the underlying reasons for the bullish views, Mr. Michaeli stated that General Motors outperformed Ford when it surpassed its own EBIT guidance in 2014 amid uncertain economic conditions. The company also kept its 2015 and 2016 guidance unchanged Tuesday. Moreover, the auto corporation is better positioned to aim at mid-size pickup and suburban utility vehicle (SUV) trucks, whose markets are expanding and are less exposed to the Japanese yen than Ford is.
“GM’s aggressive capex and restructuring spend should now turn into positives. The two should give investors better appreciation for: (a) visibility for a robust 2016-17 product cycle anchored by easier YoY comps; (b) GM’s lead in key innovations including OnStar/LTE (link), autonomous apps and electric vehicles (EVs); and (c) visibility for continued improved results abroad (GMIO/GME),” he added.
The company management does not preclude the option of further cash deployment in 2016. Citi elevated its valuation model from $4.60 to $4.64 and from $5.00 to $5.34 for earnings estimates in 2015 and 2016, respectively. Its recent price objective indicates an 8.1x P/E.
The Street is firmly bullish on General Motors stock. Out of the 24 analysts who cover the company stock, 15 suggest a Buy and eight recommend a Hold. The 12-month average target price assigned by the analysts to the stock is $42.69, a downside of 14.8% over the current trading price.
Get more GM research by Bidness Etc
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General Motors Company (GM) Stock Trading At 10.5% Discount: Citi
