Analysts at Deutsche Bank soured on General Motors Co., saying in a note Monday they have turned “much more cautious” about auto makers on growing worries about a recession in the U.S. and Europe, and that GM stands to lose the most from ensuing price pressures on vehicles.
The analysts, led by Emmanuel Rosner, downgraded their rating on GM GM, +1.45% stock to hold from buy.
Any weakening in demand for vehicles “could materialize rapidly into vehicle pricing pressure, impacting OEM [original equipment manufacturer] profitability,” Rosner said. The GM downgrade is connected to that eventual pricing pressure as well as a lack of near-term catalysts for the stock, he added.
GM earlier this month pre-announced some of its second-quarter performance, warning that it expects lower sales and profit for the three months ended in June. The company is scheduled to report second-quarter earnings July 26.
The analysts kept their hold rating on shares of Ford Motor Co. F, +2.69% and cut their price targets on both stocks. Deutsche Bank cut its target on GM shares by 37% to $ 36, from $ 57, and cut Ford’s by 29% to $ 12, from $ 17.
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Tesla Inc. TSLA, +3.41% stock is their top pick. The electric-vehicle maker is likely to see “considerable acceleration” in the second half of the year, with the continued ramp up of its two new factories in Austin, Texas, and Berlin, Germany; increased capacity at its Shanghai factory, “strong” pricing power, and the start of production of its battery cells, the analysts said.
In other auto-related analyst moves, Deutsche analysts cut their rating on Goodyear Tire and Rubber Co. GT, +3.12% to hold from buy, saying that tire replacement volumes have mostly recovered to pre-pandemic levels and the company’s upside is limited.
Not all is gloomy, however. The analysts said they expect auto makers to stick with their views that the second half of the year will usher in a “solid increase in production,” with incremental improvement for semiconductor supplies, of which shortages have been a fixture of the pandemic years.
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“GM has already reiterated it[s] full-year guidance on all metrics as part of its recent pre-announcement, and we expect it to reiterate this view; we also believe [Ford] will maintain guidance unchanged for the full year,” they said.
Shares of GM have fallen 43% this year, while Ford shares have declined 41% and Tesla shares are down 29%. Those performances compare with losses of around 18% for the S&P 500 index. SPX, +0.75%