3 Reasons Why Morgan Stanley Is Now A GM Buyer

The truck business is still growing, and General Motors Company GM is seen to benefit. 

The firm’s anticipated profits bring it on par with Big Three rivals, according to one Wall Street firm.

The Rating

Morgan Stanley analyst Adam Jonas upgraded General Motors from Equal-weight to Overweight and increased the price target from $45 to $48.

The Thesis

GM has a lot going in its favor in Morgan Stanley's view. For one, U.S. infrastructure spending — which GM economists suggest could exceed $2.4 trillion over the next decade — could drive truck sales, Jonas said in a Monday noe. 

“Greater long-term infrastructure spending typically coincides with increased pickup sales to complete the associated projects,” the analyst said. “Those projects require workers, who will also likely benefit from heightened disposable personal income, potentially further increasing pickup sales.”

The U.S. market already favors light trucks, and Morgan Stanley forecast that a 10-percent increase in segment production equates to a 14-percent pop in 2019 earnings per share.

At the same time, GM boasts attractive valuation after a 20-percent decline over six months, Jonas said. The stock trades at a one-turn discount to its historical price-to-earnings average and is one of the cheapest in global autos, he said. 

Wall Street excitement around autonomous vehicles, both in general and at GM, has waned to what Morgan Stanley calls “a more rational level.” The firm considers "Auto 2.0" to be of marginal value in sum-of-the-parts analyses.

Price Action

GM shares were up 0.88 percent in Monday morning trading.

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