It's another week in the auto industry and analysts examine General Motors (GM) stock. Citibank Has Some Color on Some Chinese EV Brands, Morgan Stanley Not Bullish on Rivian (RIVN) and ford (F) and tesla (TSLA) The bulls are ready to let loose.
Engines in general (not so) good
Last week, Bank of America analyst John Murphy wrote in a note that General Motors is looking to show it is headed in the right direction within the changing auto industry.
He wrote that he expects GM to reveal much more of its electric vehicle strategy “with a greater emphasis on hybrid technology” and to hear more about GM's plans to revitalize its Cruise robotaxi service, which could be significantly fruitful in the future.
“In the long term, we believe that robotaxi services run by automakers like GM have an inherent advantage in that they could scale more quickly and have more control over the entire experience, from the design of the car to the features of the car and the driving performance, among other benefits,” Murphy wrote.
However, for every bull, there is a bear. That bear, in this case, is Bernstein's chief auto analyst, Daniel Roeska.
In a Sept. 23 note, he downgraded GM stock from Outperform to Market Perform and lowered his price target from $54.50 to $53, citing economic concerns and its electric vehicle plans as reasons for lower expectations. .
“We believe there is a risk that the company will announce additional capital requirements during its CMD (Capital Markets Day) in October. We want to wait and see what updates GM shares,” Roeska wrote in his note titled “Let's wait and see.”
Related: The Buick Envista is America's wake-up call for Chinese cars
Firstly, he raised the issue of inventory, citing that “inventories are increasing quite a bit and currently stand at 70 days.” While 70 days is not Stellantis-level excess inventory, Roeska fears this threshold will be enough to get price discounts as continued inventory growth continues through 2025, which might not be good for its bottom line.
Additionally, he believes the impending slowdown of electric vehicles will affect his goals. This year, GM aims to build and sell 200,000 electric vehicles by the end of 2024, and reaching that goal may prove impossible.
“We expect the company to further reduce its guidance (for electric vehicles). As a result, the variable profit from EVs will be delayed and EBIT targets will be delayed until next year, at best,” he wrote.
China and young Americans
Despite not selling many cars in the United States, Morgan Stanley's Adam Jones believes the People's Republic is so powerful that they don't need to sell much to impact Detroit's Big Three.
But even with the Biden Administration's recently proposed decision on Chinese “connected car” technology, Jones notes that the Chinese are outpacing the U.S. in production: They make nine million more vehicles than their population can buy. , which is “upsetting the competitive balance in the West.”
“Even if these units do not end up directly on US shores, the 'fungibility' of lost share and profits by key US players adds pressure here at home,” Jonas said in his note.
This justification led him to downgrade GM shares from equal weight to underweight, Ford shares from overweight to equal weight, and Rivian shares from overweight to underweight. It also cut price targets for GM from $47 to $42, Ford from $16 to $12 and Rivian from $16 to $13.
In his words, the downgrade of the sector is influenced “by a combination of international, domestic and strategic factors that we believe may not be fully appreciated by investors”, including the fact that cars “are still out of reach of many homes,” citing the credit. conditions, among other factors, that keep Americans out of new cars.
As for Rivian, Jonas believes the Irvine-based maker of electric pickup trucks and SUVs is behind on ai and autonomous vehicles, “which may be necessary to meet the technological fundamentals that attracted Volkswagen as a joint venture partner.”
Bullish on Chinese households
On September 4, Citibank analyst Jeff Chung downgraded Li Auto shares from Buy to Neutral and lowered his price target from $26.20 to $21.60.
In his note, he expressed concern about Li Auto's situation. (L.I.) Increased competition from companies like Huawei and Denza, which may pressure the company to update its L7, L8 and L9 models sooner than expected.
Li Auto is used to updating cars quickly. Its first car, the Li ONE, had a market life of only 16 months. The L7, L8 and L9 were introduced in 2022 and Chung anticipates the introduction of their replacement models by 2025.
However, Jeff Chung may have also made an about-face. In a note published on September 24, Chung raised his price target on the stock from $21.60 to $25.50, citing stronger delivery estimates following a “sector sell-off” in the summer.
In August 2024, Li Auto delivered 48,122 vehicles, an increase of 37.8%.
Speaking of increasing sales and deliveries, Chung took advantage of this reason to increase XPeng's target price. (XPEV) from $8.90 to $10.30.
He thinks that newly launched models like the MONA M03 will contribute to an increase in deliveries that may amount to 207,000 units this year, 322,000 in 2025 and 405,000 in 2026.
More automotive:
- The Buick Envista is America's wake-up call for Chinese cars
- Ford CEO says he's sick and tired of making 'boring' cars
- Toyota rejects the attack and follows Ford as a new anti-DEI target
Who let the (Tesla Bulls) out?
Tesla has a busy week ahead of it on October 10. That same day, all eyes will be on Warner Bros. Studios, where the long-awaited “Robocab” is expected to be revealed. However, analysts are also very focused on another day that week: October 8, when IB analysts will analyze the Musk-led electric vehicle maker's third-quarter delivery results.
On September 24, Piper Sandler analyst Alexander Potter estimates 459,000 deliveries for the third quarter of 2024, growth of 3.3% quarterly and 5.4% year-over-year. In a September 26 note, Deutsche Bank analysts predicted an estimate of between 460,000 and 465,000 units.
In a Sept. 27 note, Wedbush's Dan Ives wrote that he believes deliveries “will surpass the Street's 462,000-unit ghost with numbers whispering in the 465,000 to 470,000 range,” noting that this will provide a solid rebound in the second half of 2024.
Ives and other analysts cite that China could play a huge role in all of this. Ives mentions that Tesla's “favorable leasing/financing conditions” may contribute to what he sees as “significant growth” in the region.
However, this only provides a backdrop to what Ives considers most important.
“With the upcoming Robotaxi event expected to provide some notable updates on the company around FSD, ai and the future of the company, the next phase of Tesla's growth story revolves around autonomous, Robotaxis and ai that will be developed in the Tesla ecosystem in the coming years,” Ives wrote. “In our opinion, that vision is underway and just a few weeks away from the 10/10 Robotaxi event, which we will attend.”
Piper maintains an Overweight rating on Tesla, while Deutsche Bank maintains a Buy rating on Tesla with a $295 price target. Wedbush maintains its Overperform rating and $300 price target.
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