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



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.

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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.


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