Love or Hate GM, The Buy Ratings Make Sense
I was waiting for this. As soon as GM stock started to pick up momentum or get buy ratings on Wall Street, the "anti-GM brigade" would immediately scream.
And so it was on Tuesday, when four firms initiated coverage of GM with positive comments, I was stopped twice on the street by people who essentially called the buy ratings "ridiculous."
The arguments/complaint generally goes like this. GM isn't all that different now that it's out of bankruptcy and will eventually return to its historical pattern of losing market share and not being consistently profitable.
When I heard this, I tried to explain to these people why Wall Street is bullish on GM, but time and again I was told I'm wrong.
These "anti GM'ers" remind me a lot of the folks who said Toyota's rise in the 90's would be short lived. In both cases, people are not looking at the data, but instead judging the company on their personal perceptions.
Just as many were foolish to dismiss Toyota in the 90's when it was racking up big profits, I suspect many people are looking at GM emotionally, and not rationally.
You may hate the fact GM got bailed out. You may hate the fact GM shareholders and bond holders took it in the shorts in bankruptcy. You may hate the fact it won't have to pay tax on roughly $50 Billion of its profits in North America.
That's fine. Nobody says you have to drive a Chevy and love GM. And nobody says you have to buy GM shares.
But the fact is, GM is currently wired to be very profitable. That's the reason Wall Street is bullish on the stock. So bullish, at least one firm has a price target of $50.
Bankruptcy has afforded GM the chance to dramatically cut it's costs and debts. And because of that, GM is primed to take off, especially if auto sales pick up. That is not my opinion. That is the opinion of many on Wall Street and in the auto world.
Does this mean GM will be king of the U.S. five years from now and still raking in billions? No. The company faces numerous challenges and nothing is guaranteed.
But, when you look at this stock, detach your emotions and look at its potential. Perhaps them you will see why analysts are bullish on the auto maker