General Motors (GM) shares took a dip on Monday after Bernstein downgraded the stock from Outperform to Market Perform. Analyst Adrian Yanoshik attributed the downgrade to valuation concerns, particularly in light of the company’s upcoming October Capital Markets Day.
Yanoshik expressed worries about rising earnings headwinds, suggesting that GM might announce the need for additional capital during the event. He pointed out that while GM’s stock price has appreciated significantly since last November, the company faces potential challenges in the near future.
The analyst believes that GM’s recent stock performance is largely due to its buyback program, but he sees headwinds emerging. He expects continued inventory build in the United States to create pricing pressures in 2025. Furthermore, he’s concerned that delays in the company’s electric vehicle (EV) and Cruise initiatives could lead to increased losses next year.
These concerns prompted Yanoshik to lower Bernstein’s adjusted earnings forecast for 2025 by approximately 8%. He also highlighted the importance of GM’s upcoming investor day, believing it could shed light on further headwinds for the company. Yanoshik anticipates that updates on key strategies might reveal the need for additional capital, potentially hindering GM’s ability to generate robust free cash flow in the short term.
He voiced caution about GM’s future plans, stating, “We are cautious about the company’s future plans and are eager to hear the updated strategy at the CMD as we don’t see GM’s approach from last year being extended into its current strategy.” He expressed concerns about the company’s EV sales target, its collaboration on new technology, its struggles in China, and the unclear roadmap for Cruise. All of these factors, he argued, present challenges to GM’s ability to generate free cash flow in the short term.
At the time of publication, GM shares were down 2.38% at $47.72. The market’s reaction to this downgrade underlines the importance of GM’s upcoming Capital Markets Day, as investors await further clarification on the company’s strategies and the challenges it faces.
