Updated at 10:07 am EST
General Motors (GM) – Get General Motors Company Report shares slumped lower Tuesday after analysts at Morgan Stanley cut their rating and price target on the carmaker, citing doubts over its near-term effort to ramp up electric vehicle production.
Morgan Stanley analyst Adam Jonas cut his rating on General Motors to “equal-weight”, while reducing his price target by $20 to $55 per share, noting its EV shift will likely produce a negative compound annual growth rate, in terms of overall revenues, between now and the end of the decade.
Jonas added that GM’s near-term outlook, which includes a 2022 profit forecast of around $14 billion capital spending of around $10 billion a year for the next several years, has lead to the “most significant estimates reduction we have made for GM since the start of Covid in early 2020 … our revised EPS of $6.64 per share is approximately 11% lower than our previous forecast.”
“We now expect GM to remain one holistic company for at least the next 12-18 months as management builds out its EV, AV and connected capabilities,” Jonas said. “We still harbor concerns around the legacy OEM’s shift from ICE to electrification, which we have modeled via forecasting GM to be a smaller company going forward.”
General Motors shares were marked 5.1% lower in early trading Tuesday to change hands at $48.14 each, a move that would extend the stock’s six-month decline to around 11%.
Last week, GM posted stronger-than-expected fourth quarter earnings of $1.35 per share, or $2.8 billion, on sales of $33.58 billion.
The group sees adjusted earnings of between $6.25 and $7.25 per share for 2022, with total worldwide vehicle sales of around 1.477 million units.
GM also said it will boost its overall capital spending on EV production by $35 billion over the next three years as it takes on rivals Ford and Tesla TSLA in the fastest-growing segment of the global car market.
Semiconductor shortages, however, could both trim production capacity and profit margins well into the coming year, a concern that has hammered Ford share for much of the past three weeks.
Ford said over the weekend that it will halt production at eight north American factories, including one that produces the F-150 pickup, for at least the next week amid the ongoing shortage in semiconductor supplies.
The moves followed less than a day after the company missed Street forecasts for its fourth quarter earnings while cautioning that supply chain disruptions and surging input costs would linger in the new year. Ford also warned customers that in late January that it would stop taking retail orders for the Maverick amid a production backlog for the newly-unveiled hybrid pickup.