look good for a short-term trade based on the likelihood of solid SUV shares and more worker concessions, Prudential said in an upgrade Friday.
The brokerage raised the stock to overweight from neutral and bumped the price target to $31 from $23. On Wednesday, GM shares surged 9% after Merrill Lynch made a similar call, citing enthusiasm among GM workers for the automaker's buyout program.
Prudential was also optimistic on that front, saying near-term catalysts outweighed the headwinds. It noted, however, that it was compressing its usual six- to 12-month price-target horizon to three months, and said the company's prospects beyond that time frame are murky.
"Long-term investors should approach the stock with caution as sales and market share will likely continue to fall, our free cash flow outlook for next year remains substantially negative, and the prospect for significant gains from the September 2007 UAW contract renegotiation appears remote," Prudential said.
"However, for those investors with a short-term (less than three months) time horizon, we expect to see big year-over-year full-size SUV sales increases, take-up of the special attrition plan by June 30 that is ahead of the 15,000 to 20,000 plan and close to GM's 2008 target for 30,000 departures, upward EPS revisions and a deal between GM, Delphi and the UAW -- all of which should deliver further upward momentum to the shares."
Prudential now expects GM to earn $3.86 a share next year, up from its previous estimate of $3 a share. The Thomson First Call consensus estimate is $2.60 a share.
In premarket trading, shares of GM rose 53 cents, or 1.9%, to $28.43.