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What's Wrong With Ford and GM Shares?

Levy dismissed the suggestion that GM's share price has been impacted by the U.S. Treasury's sale of $490 million worth of GM shares in February, when shares traded between $26.19 and $29.36, equating to a sale of about 17.5 million shares. Average daily volume is around 11 million shares.

"If there is a value in the stock, the stock should move towards its natural value regardless of the potential overhang from selling shareholders," Levy said, adding. "$500 million worth of stock is not so much for GM."

Regarding Ford, "sentiment clearly cooled going into and after the 4Q earnings report and (Ford) entered oversold territory, a recent bounce notwithstanding," Nesvold wrote in a recent report which suggest the lagging share price reflects false perceptions following the earnings report. Nesvold had a buy rating on the stock and a price target of $16.

"We continue to believe that Ford has the right team in place to address the operating losses in Europe; that the company's U.S. product cycle likely hits the accelerator again in 2014 with the new F-150; and that South America and Asia Pacific Africa (APA) can be substantial earnings contributors over time," Nesvold wrote. He forecast a return to break-even in Europe by 2015; the company expects losses of $2 billion annually in Europe this year.


Nesvold said three aspects of Ford's outlook suffer from false negative perceptions. "The biggest overhang on Ford shares has been the step-down in North American margins implied in the 2013 outlook," to around 10% in 2013 from 10.4% in 2012, Nesvold said. Investors anticipate increases in pension and amortization costs, but apparently fail to consider that "Ford's North American business should throw off more cash in 2013 than it did in 2012," he said.

Secondly, despite the falling yen, Ford has seen no evidence of higher incentives by Japanese automakers. Additionally, Nesvold said, a projected $1.5 billion increase in capital expenditures is "a high-class problem (because) Ford has multiple projects into which it can deploy capital at high incremental returns."

UBS analyst Colin Langan has buys on Ford, GM, Toyota (TM - Get Report) and Hyundai. In a recent report, Langan said GM is the best-positioned automaker because of new vehicles arriving this year including the K2XX pickup. GM has a 33% refresh rate, he said, while Toyota is second with a 27% rate. Ford lags with a 7% refresh rate, but nevertheless should benefit from its 2012 launches of the Fusion and Escape, he wrote. Top five 2013 launches will include the K2XX pickups and SUVs as well as Toyota Corolla, Nissan Rogue and Jeep Cherokee, Langan said.

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SYM TRADE IT LAST %CHG
F $16.11 0.00%
GM $37.61 0.00%
TM $134.90 0.00%
AAPL $126.41 0.00%
FB $81.21 0.00%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

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