UPDATE: Goldman Sachs Upgrades General Motors on Product Story

In a report published Tuesday, Goldman Sachs analyst Patrick Archambault upgraded General Motors GM from Buy to Conviction List Buy, and raised the price target from $38.00 to $45.00.

In the report, Goldman Sachs noted, “We add GM to the Americas Conviction Buy list, with 24% upside to our $45, 12-month price target. We see GM as one of the most attractive product stories in the sector. Following a dearth of investment during the downturn the company has significantly ramped up R&D and we estimate GM's global portfolio age will decline to 4.3 years by 2016 on a global basis from 5.3 years today. Nowhere is this opportunity more visible than North America where we estimate the refresh of GM's high volume and high margin truck platform the K2xx could drive as much as 1% margin accretion from pricing alone. On a global basis, we see this product driven recovery driving a 15% EBITDA CAGR from 2013-2015 which is meaningfully above the ~10% average we see for the suppliers. We also like the fact that with GM's $28bn global net pension liability, the equity portion of the company's enterprise value stands to benefit as rates rise. On our estimates, the 67bp increase we have seen in the Moody's AA index YTD would imply a $6bn increase in equity value even including an offset from lower returns in GM's bond portfolio.”

General Motors closed on Monday at $36.14.