By Michael Elkins
Berenberg downgraded General Motors (NYSE:GM) to a Hold rating (From Buy) and cut the price target on the stock to $41.00 (From $45.00) as analysts believe the American automaker will continue to face near-term challenges from mass-market affordability and cost inflation. The company is scheduled to release Q4 results on Tuesday, January 31st.
GM has announced a number of high-profile EV releases in an attempt to regain momentum following a recall of its Chevrolet Bolt EVs. Analysts expect GM to exceed its 1m-before-2025 capacity goal, putting it on course for EV leadership in North America.
Berenberg expects GM to rationalize and simplify ICE production more aggressively than its peers, pushing group margins towards 10%. However, they also think that GM will only reach a double-digit margin over the longer term as the automaker will continue to face near-term challenges from mass-market affordability and cost inflation.
For 2023, the analysts expect c150bp of EBIT margin contraction and expect guidance to indicate lower margins yoy, falling from the double-digit average experienced across 2021 and 2022. Berenberg retains softer 2023 demand assumptions, noting that GM also plans its 2023 budget on a 15m seasonally adjusted annualized rate (SAAR) assumption in North America, indicated in its November 2022 investor day.
Shares of GM are down 2% in pre-market trading on Monday.