GM Stock Slumps Despite Ratings Upgrade
NEW YORK (TheStreet) -- General Motors (GM) - Get Report stock is down by 0.91% to $31.07 in late-afternoon trading on Wednesday, despite a ratings upgrade to "equal weight" from "underweight" at Morgan Stanley earlier today.
The automaker's low multiple discounts a "temporary peak in profit heading into a unsustainable and difficult future," but there are changes to GM's core business model that could affect its share price, the firm contends, Barron's reports.
The impact to the stock price could be "significant...if structural changes can convince the market that GM's business model has extended relevance or a positive terminal value, the current 3x EBITDA multiple could represent a "coiled spring." Each turn of EBITDA multiple at the group level is worth ~$10 per GM share," Morgan Stanley contended.
These changes include finding alternatives for its Cadillac division and creating a separate auto technology and transport entity, the firm added.
Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B-.
GM's strengths such as its compelling growth in net income, revenue growth, notable return on equity, attractive valuation levels and impressive record of earnings per share growth outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
You can view the full analysis from the report here: GM
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this article's author.
