Citigroup Cuts GM Price Target

Shares of General Motors GM tumbled almost 3.5 percent Tuesday after the automaker announced four more recalls. GM expects a $200 million dollar charge for the second quarter on 2.42 million additional cars recalled.

Because this expense (and an additional $200 million from a previous recall) will drop EPS, Citigroup analyst Itay Michaeli is reducing his price target on the company. Michaeli’s 2014 EPS expectation is reduced by 4.95 percent to $2.88 and he dropped his 2015 EPS expectation by 2.34 percent to $4.60.

Despite this significant EPS (for a blue chip) reduction, Citigroup cut its price target from $48 to $47.

The note states, “We don’t view this as thesis-breaking at the moment but see continued headline risk particularly with GM’s internal ignition-switch investigation expected to soon wrap up. Away from recall risks, fundamentals show a credible path to a mid/high-$4 EPS next year, which should, in theory, help sentiment in H2.”

Shares of General Motors are not reacting to the downgrade, as the street is still trying to figure out the risk of another recall. Shares of GM are up 1.36 percent in Wednesday’s session to $33.53.