uploads/2016/04/316.png

Why Analysts Recommend a ‘Buy’ for GM ahead of 1Q16 Earnings

By

Updated

General Motors’ 1Q16 earnings

Previously, we saw that analysts are expecting General Motors’ (GM) upcoming earnings to continue in a positive trend despite a disappointing stock performance in 2016 so far. Investors should also pay attention to analysts’ recommendations, as they may affect the company’s stock price movement. If popular analysts change their views, a significant short-term movement in the stock price could occur. In this article of the series, we’ll explore what analysts are recommending for GM ahead of its 1Q16 earnings release.

Article continues below advertisement

Analyst recommendations

According to the latest Bloomberg consensus, 52.2% of analysts covering General Motors have given “buy” recommendations while 43.5% of analysts have given it “hold” recommendations. Only one analyst among the 23 covering the stock has recommended a “sell.”

Continued strong US sales of SUVs and trucks as compared to small cars in 1Q16 could be a reason why most analysts are maintaining a positive view on General Motors. Heavy vehicles such as SUVs and trucks typically have higher margins than small cars.

Target prices

As of April 11, 2016, GM’s consensus 12-month target price was $37.39 with an upside potential of 25.5% from its current market price (or CMP) of $29.29.

Among the popular analysts, Colin Langan of UBS and Ryan Brinkman of J.P. Morgan have the highest price target of $47 for the company, which represents a ~58% upside potential. Adam Jonas of Morgan Stanley expects the company’s stock to underperform the broader market. He maintains a low target price of $26, representing a negative return of ~13%.

Recommendations for peers

Analysts’ estimates for the 12-month return potential of General Motors’ peers (FXD) are as follows:

  • Ford Motor Company (F): 40.9% of analysts gave it a “buy” with 15.6% upside potential.
  • Fiat Chrysler Automobiles (FCAU): 46.7% of analysts have given it a “buy” with a 33.7% upside potential.
  • Tesla Motors (TSLA): 47.8% of analysts gave it a “buy” with just 2% upside potential. Recently, the company unveiled its first mass-market vehicle Model 3.
  • Ferrari (RACE): 62.5% of analysts have given it a “buy” with 12.2% upside potential.

Continue to the next article to find out analysts’ estimates for General Motors’ revenues in 1Q16 and beyond.

Advertisement

More From Market Realist