General Motors Company (NYSE: GM) stock has been on quite a run, up more than 24 percent over the past three months. However, GM shares were down more than 3 percent on Monday after Goldman Sachs downgraded the stock to “sell” and said GM stock has a 28 percent downside from its current price.
Despite positive headlines about the progress of GM’s driverless vehicle unit, Goldman analyst David Tamberrino says the North American auto market has peaked and will likely begin to decline in 2018. As seasonal adjusted annual rates stabilize in 2018, Tamberrino says GM will be unable to hit its earnings targets.
“We believe cleared through pent-up demand (given sales above normalized levels since 2013) and challenged consumer affordability (rising interest rates, tightening auto credit) will drive a normalization in U.S. [seasonal adjusted annual rates] beginning in 2018, ultimately translating into declines in utility vehicles and passenger cars,” Tamberrino says.
As a result, Goldman expects GM’s adjusted earnings before interest and tax will decline 22 percent in 2018.
Tamberinno also says GM is vulnerable to losing up to 3 percent pickup truck market share to Ford Motor Co. (F) and others in 2018. Ford recently refreshed its F-Series pickup line. A smaller mix of pickups in GM’s 2018 sales could also pressure margins, he says.
Tamberinno says GM could improve its current situation by being more disciplined with its production and further reducing inventory levels.
“In addition, if the company brings an autonomous vehicle for ride-hailing to market sooner than we expect and at a cheaper cost, we would become more positive on its future prospects of the business model,” he says.
Despite Goldman’s pessimism, other analysts are more bullish on GM’s prospects. Last month, Deutsche Bank analyst Rod Lache said GM may be winning the driverless vehicle race.
“GM’s AVs will be ready for commercial deployment, without human drivers, much sooner than widely expected (within quarters, not years), and potentially years ahead of competitors,” Lache says.
Deutsche Bank has…
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