This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

What's Wrong With Ford and GM Shares?

DETROIT ( TheStreet) -- Despite steadily rising U.S. auto sales, shares in Ford (F - Get Report) and GM (GM - Get Report) have failed to keep up with the rising equity markets.

Since Jan. 1, Ford shares are flat and GM shares are down about 4%, while the S&P 500 is up 9% and the Dow Jones Industrial Average is up 10%. Ironically, the stocks are lagging even though recovering auto sales have been a pocket of strength in the economy and were a key element in President Obama's 2012 campaign for re-election. Nevertheless, the two companies' broad global footprints are hurting them today.

"The biggest factor weighing on these companies is Europe," said S&P Capital Markets analyst Efraim Levy, in an interview. "As you get more clarity on a turnaround in Europe, on if that will happen and when, it will relieve pressure on the stocks. In the U.S., both companies are doing well and are gaining market share."

Ford and GM both hit 52-week highs on Jan. 15, when Ford touched $14.30 (reached again on Jan. 17) while GM touched $30.68. The high marks reflected the enthusiasm surrounding the Detroit Auto Show, where both Ford and GM highlighted promising new products. Subsequently, fourth-quarter earnings reports disappointed investors, even though Ford beat estimates, because of lower-than-anticipated margin outlooks in both cases.

On Tuesday, Ford closed at $13.39 and GM closed at $28.37.

Looking ahead, the impending impact of 23 new product introductions by 2017 seem likely to boost GM's market share, which declined to 18% in 2012 from 19.6% in 2011. "GM had been suffering from a dearth of new products because it was headed to bankruptcy, but now it's bringing new products to market again," Levy said.

Nevertheless, Levy downgraded GM shares to hold from buy following the Feb. 14 earnings report, reducing his 12-month target price to $31, reflecting weakness in Europe and an increase in the expected tax rate to 35% from 10%, partially offset by a $600 million reduction in depreciation charges following an asset write-down in Europe. Jefferies analyst Peter Nesvold has a hold and a $29 price target.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
F $14.16 1.20%
GM $31.97 0.76%
TM $122.13 1.20%
AAPL $109.93 -0.41%
FB $93.70 1.80%


Chart of I:DJI
DOW 16,641.77 +169.40 1.03%
S&P 500 1,975.40 +24.04 1.23%
NASDAQ 4,759.2910 +51.5160 1.09%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs