General Motors Gets Price Target Boost at Morgan Stanley

General Motors' connected services has a value of about $8 billion today, says Morgan Stanley.
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General Motors  (GM) - Get Report received a mild price target bump to $57 from $53 a share at Morgan Stanley.

The new price target represents a potential 33% upside from the stock's trading levels Thursday. GM shares rose 0.4% to $41.59.

The firm maintaining its overweight rating on the stock.

"GM is offering fleet services today and appears to have big plans to grow the business. At GM’s 2020 capital markets day, the company discussed licensing, subscriptions and customer insight/data opportunities from the connected fleet," said analyst Adam Jonas.

"Just like Tesla monetizes autonomy through its FSD (full self driving) product, it seems GM is ready to increase monetization of its own autonomy solution called 'Super Cruise," the analyst added.

GM plans to have seven models with Super Cruise in 2021, with that number growing to 12 by 2023.

The company's discounted cash flow gives Morgan Stanley a base case valuation of $80 billion for GM Connected Services, which translates to $54 a share. That valuation comes after discounting DCF by 30% due to risks around execution, technology and competition. 

However, that is a future estimate for the business segment. Today, the business is worth about $8 billion, according to Morgan Stanley's note. 

That discount is "to allow for the fact that the market may not be willing to give credit to GM shares for their Connected Services business today," Jonas said. 

The firm estimates General Motors will have about 98 million vehicles in its global fleet by 2022, and with every $1 of monthly average revenue per user on its installed base case the company produces $1.2 billion in revenue.