Barclays Downgrades GM, Cuts Target To $36

In a report published Thursday, Barclays analyst Brian A. Johnson downgraded the rating on General Motors Company GM from Overweight to Equal-Weight, while lowering the price target from $44 to $36. The analyst believes that there is unlikely to be any meaningful upside to the stock at least for the remainder of 2015.

"[W]hile some would argue that cheap valuation, a solid dividend, and ongoing share buybacks make the stock compelling, these items are likely irrelevant in an environment of deteriorating macro and negative earnings revisions," Johnson stated.

Given the deteriorating auto market in China, and there being very little to offset the situation in other regions, the analyst believes that the macro environment could prove incrementally unfavorable for General Motors.

"We expect China headwinds to spark a round of negative earnings revisions and guidance cuts for GM. And given auto stocks (and the OEMs specifically) typically correlate to the direction of earnings, we have a tough time seeing GM stock outperforming through the earnings revisions," according to the Barclays report.

The analyst believes that the challenges in the Chinese market have not as yet been fully priced into General Motors' stock. The analyst has accordingly cut the annual China equity income estimate by about 25 percent.

Among the challenges that the company face in China is the fact that General Motors holds a mature position in this large market, which means that if there is a decline in the Chinese market, it would impact the company significantly. This market accounted for 47 percent of the company's unconsolidated volume as well as about 20-30 percent of its cash flow in 2014.