Morgan Stanley upgrades GM, says stock is oversold

Published Mon, May 1 20237:02 AM EDTUpdated Mon, May 1 20238:47 AM EDT

Morgan Stanley thinks investors may be overlooking shares of U.S. automaker General Motors . The firm upgraded GM to overweight from equal weight Monday. It also raised its price target to $38 per share from $35, implying upside of 15% from Friday's $33.04 close. Morgan Stanley's bull case is even higher, with a new $60 per share target representing nearly 82% upside. "GM may be overearning, but the stock is oversold," Morgan Stanley analyst Adam Jonas said. General Motors shares are down nearly 2% year to date. They have also lost 13% over the past 12 months. GM YTD mountain Morgan Stanley thinks a bull case for General Motors could see the U.S. automaker's stock climb as high as $60 per share. Jonas lauded the company's latest quarterly results and highlighted the slower-than-anticipated "de-adoption" of internal combustion engine vehicles by consumers and higher free cash flow conversion. The company beat on both adjusted earnings per share and revenue last week. GM also raised its adjusted earnings guidance for 2023 to a range of $11 billion to $13 billion. That's up from $10.5 billion to $12.5 billion. "GM has taken a number of disciplined actions this year and demonstrated further cost cutting initiatives during the quarter," Jonas said. "Following the first quarter we are increasingly convinced that GM is focused on capital discipline (potentially austerity, if needed) during an uncertain environment." And Jonas thinks GM is well positioned to adequately tackle the ever-challenging electric vehicle market, which has seen competitors such as Tesla and Rivian contend with issues including proper pricing, demand and supply constraints. "We believe recent significant changes in the economic and competitive environment of the electric vehicle market have encouraged General Motors and its peers to apply an even greater level of discipline to the economic investment outlook through mid-decade and beyond," Jonas said. — CNBC's Michael Bloom contributed to this report.