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GM shares tumble after Morgan Stanley downgrades stock on EVs, 2022 guidance

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A General Motors sign is seen during an event on January 25, 2022 in Lansing, Michigan. – General Motors will create 4,000 new jobs and retaining 1,000, and significantly increasing battery cell and electric truck manufacturing capacity.
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DETROIT – Shares of General Motors tumbled in premarket trading Tuesday, setting them on pace to open at their lowest point since September after Morgan Stanley downgraded the company’s stock.

The Detroit automaker’s 2022 guidance was “well below our forecast,” Morgan Stanley top automotive analyst Adam Jonas wrote in an investor note lowering the shares from overweight to equal-weight. He also noted concerns over the pace of GM’s transition to electric vehicles in lowering the bank’s 12-month price target on GM’s stock to $55 from $75, about 8.5% growth over the next year.

Jonas called the downgrade “the most significant estimate reduction” from Morgan Stanley regarding GM since the onset of the coronavirus pandemic in early 2020.

“We acknowledge the $20 reduction in our GM price target is significant and paired by what we believe is a ‘narrative change’ in our outlook compared to our prior investment thesis,” Jonas wrote.

GM shares fell in pre-market trading by 4.5% to about $48.45 a share, down 28% from their 52-week high of $67.21 a share on Jan. 5. The stock’s 52-week low is $47.07 a share.

GM’s 2022 forecast includes an operating profit of between $13 billion and $15 billion, or $6.25 and $7.25 earnings per share, and net income of between $9.4 billion and $10.8 billion.

Morgan Stanley’s revised earnings per share forecast for GM is $6.64, cut by roughly 11% from its previous forecast of $7.49.

Jonas said while GM “has big plans” for its new line of electric vehicles, there’s “rising execution risk on an absolute and relative basis more than we previously believed.” Specifically, a slower-than expected ramp-up of EVs in North America.

GM is targeting 400,000 units of EV sales in North America in 2022 and 2023, combined, on its way to a production capacity of more than 1 million each for China and North America by 2025.

Morgan Stanley previously forecast GM would sell 114,000 EVs globally this year, followed by 600,000 in 2025, excluding a Chinese joint venture with Wuling that’s selling a small EV in that market

Jonas has pushed the company to split its Ultium battery, EV and autonomous driving operations from the rest of the automaker, which Barra has steadfastly refused. Jonas cited Barra’s “One GM” strategy and slower-than-expected ramp-up in commercializing its Cruise autonomous vehicle unit as reasons for the downgrade.

– CNBC’s Michael Bloom contributed to this report.

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