Morgan Stanley has turned bullish on General Motors.
Lead auto analyst Adam Jonas — better know for being a longtime Tesla bull — has upped GM stock to “overweight” and raised his target price to $37 from $29. On Monday, GM shares were trading at $32, up about 2% from the Friday close.
Jonas highlighted GM’s efforts to move into new transportation business models, as it has done by investing $500 million Lyft, acquiring self-driving startup Cruise Automation, and launching Maven, a new advance mobility division.
But he also zeroed in on GM’s core business and contrasted its prospects with the buzz around transportation disruptions, such as those coming from Uber’s self-driving Pittsburgh experiment.
“There are lots of cars with steering wheels left to sell,” he wrote.
“With all the excitement around fully autonomous transport, we believe investors may be overlooking the steps and the time required to get there. Regarding the now well understood ‘peak auto’ thesis, we think investors may be underestimating how long this cycle can last and the related levels of mix and profitability, driven by further extension of credit … replacement demand.”
Jonas’ bullishness is short-term, however.
“We are not pitching GM (or any incumbent auto company) as a long-term beneficiary of the transformation to shared, autonomous, and electric transport,” he wrote. “We argue that GM’s value to investors may lie in the elongation of its relevance and profitability during the early and middle stages of the transformation to autonomous (but not yet driverless) transportation.”
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