After another strong quarter of car demand, Wall Street is taking up price targets for shares of
Ford Motor
and
General Motors.
Better sales, however, aren’t enough to get them to change their ratings on the stock.
Monday, Barclays analyst Dan Levy and Wells Fargo analyst Colin Langan raised price targets for GM (ticker: GM) and Ford (F). Langan took his Ford target to $11 a share from $10 and his GM price target to $32 a share from $31. Levy took his Ford target to $14 a share from $13 and his GM price target to $46 a share from $42.
Levy has the higher target prices and he rates both stocks Hold. Langan is more bearish. He rates both stocks Sell.
Better industry volumes are helping. “Q2 earnings will likely have less downside risk given already conservative estimates on global light vehicle production,” Langan writes.
Production and sales, especially in the U.S., came in a little better than he expected. U.S. consumers bought new cars at a rate of about 15.6 million units a year in the second quarter, up from 15.3 million in the first quarter and 14.3 million in the fourth quarter of 2022.
It’s a positive, but not enough to move Langan, or Levy, off existing ratings. A looming strike is one reason Langan cites. The existing contract between auto makers and the United Auto Workers labor expires in a couple of months. A strike can introduce volatility into the stocks and a settlement will have Wall Street adjusting earnings for new labor costs.
It seems the second-quarter earnings just don’t matter that much to Langan and Levy. Overall, the Street isn’t too high on shares of either. About 56% of analysts covering GM stock rate shares Buy. That’s about the average Buy-rating ratio for a stock in the S&P 500, but about 63% of analysts rated shares Buy a year ago, a sign that sentiment is slipping.
Sentiment for Ford is improving, but not to any great level. About 39% of analysts rate Ford shares Buy. The Buy-rating ratio was about 36% a year ago.
Wall Street appears worried about what will happen to profits as the economy slows and new car pricing starts to soften. All that plus a potential strike is keeping many on the sidelines.
Investors feel a little better than analysts. Coming into Monday trading, GM shares are up about 23% over the past 12 months. Ford shares are up about 29%.
GM and Ford shares are both up slightly in premarket trading.
S&P 500
and
Dow Jones Industrial Average
futures are flat.
Write to Al Root at [email protected]
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