Citigroup Downgrades Ford, Chooses General Motors For 2015
In a recent report, analysts at Citigroup gave their 2015 outlook for two largest American automakers, General Motors Company (NYSE: GM) and Ford Motor Company (NYSE: F). Citigroup analysts chose GM as their preferred investment and downgraded Ford stock to Neutral.
Bullish On U.S. Auto Cycle
Citi analysts believe that the U.S. auto manufacturing cycle is in an upswing. Despite the fact that they generally prefer suppliers to manufacturers, analysts believe that negative sentiment surrounding the manufacturers has created valuation opportunities.
The Gas Vs. Yen “Arm Wrestle”
The Citi report focused on analyzing GM and Ford in terms of exposure to both the Japanese Yen and low gas prices. “In the context of our bullish stance on the U.S. cycle, in 2015 automaker stocks will increasingly be distinguished by exposure to the powerful ‘arm wrestle’ unfolding between gas prices (good) and the Yen (bad).”
GM Sweeps The Competition
Analysts see higher truck demand resulting from lower gas prices, and believe that GM is better positioned to absorb that increased demand.
When it comes to exposure to the Yen, Citi’s proprietary Yen Maps indicate that, contrary to commonly used data, Ford has a greater exposure to the Yen than GM.
In the report, Citi reiterated their Buy rating on GM stock.
Citi analysts believe that the risk/reward balance in Ford’s stock is no longer favorable enough to maintain a Buy rating.
Citi analysts believe that the high risk involved in owning the auto manufacturers requires its stocks to be trading at extremely compelling valuations before those stocks are worth buying over the stocks of certain suppliers, and Ford is no longer a compelling valuation at current levels.
Latest Ratings for GM
|Sep 2016||Nomura||Initiates Coverage on||Neutral|
|Sep 2016||Morgan Stanley||Upgrades||Equal-Weight||Overweight|
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