Barclays Upgrades Both Ford And General Motors To Overweight But Prefers GM Over Ford

Barclays analyst Dan Levy upgraded the rating on Ford Motor Company F and General Motors Company GM from Equal-Weight to Overweight with a price target of $14 and $37, respectively.

The analyst says the different pressures on the business have created "peak pain," yielding trading multiples at historical lows.

While the analyst acknowledges that structural concerns aren't likely to dissipate any time soon, specifies that even a modest reversal of sharply negative sentiment could drive an attractive upside.

The analyst notes that given historically depressed multiples, an attractive upside exists.

Also Read: GM, UAW Reach Tentative Agreement, Potentially Putting An End To Costly 6-Week Strike

If both companies see their stocks return to historical multiples, there is still attractive upside even on '24 estimates reflecting more normalized profit, notes the analyst.

The analyst does not see any catalysts that will fully eliminate structural concerns on the EV transition overhang and the impacts on "peak pricing" fears for the cycle. 

However, the analyst expects few catalysts, including the resolution of the UAW strikes and Ford and GM posting FY24 EPS upwards of $1.50 and $6, respectively, still quite healthy levels.

Also See: UAW-Ford Deal Encompasses $8.1B In Investment And $5K Ratification Bonuses

On GM specifically, the analyst says any meaningful changes around Cruise or indications of forward progress would help.

For Ford, the recent upgrade of Ford Motor and FMCC debt to Investment Grade (BBB-/ Stable) could be a positive near-term catalyst, writes the analyst.

The analyst prefers GM over Ford. The analyst notes sentiment on GM is considerably worse, which should offer an easier reversion. While both have sharply underperformed the SPX YTD (+9.2%), Ford has outperformed GM (-11.9% vs. -16.2%).

The analyst also upgraded the view of the U.S. Autos & Mobility sector to Positive from Neutral. The analyst notes improved sentiment amid healthier end markets / earnings levels can more than overcome questions on macro and EV.

Price Action: F shares are trading higher by 0.77% at $9.82 and GM lower by 1.01% at $27.92 on the last check Wednesday.