Morgan Stanley Cuts GM (GM) to Underweight; Trading Near Fair Value, But Other Auto Stocks More Compelling

Morgan Stanley downgraded General Motors (NYSE: GM) from Equalweight to Underweight and cut its price target from $49 down to $33.

Analyst Adam Jonas noted sees the auto industry entering an era of 'significant technology disruption.' The analyst commented, The pressures will challenge conventional thinking on capital allocation, engineering and human resources. We think the market’s got it right on GM valuation and no longer see significant risk-adjusted upside ... GM is highly levered to a cyclical recovery in the North America car market, augmented by an aggressive product revival. The biggest fundamental opportunity for the ‘new GM’ is to take risk on the top line (new products and technology) that its predecessor was never able to adequately withstand. GM will need to muster every bit of its financial and technological resources to make the transition to advanced powertrains, connected vehicles and, ultimately, autonomous cars.

Jonas believes GM is now trading at about fair value, though he doesn't see it as a compelling enough reason on a risk-adjusted basis relative to other auto stocks in our US coverage

For an analyst ratings summary and ratings history on General Motors click here. For more ratings news on General Motors click here.

Shares of General Motors closed at $34.53 yesterday.

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