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Barclays: GM Will Unlock Value By Shedding 'Value Trap' Reputation

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In a recent report, analysts at Barclays discussed the steps General Motors Company (NYSE: GM) has taken to shed its "value trap" reputation.

Analysts also discuss the ways that changing the stock's reputation will unlock the true value of GM shares.

Gaining Trust Will Provide Boost

GM recently announced a big share buyback program, but analysts point out the minimal reaction in share price to the news. Analysts were not surprised at the market reaction and believe that traders likely fail to see additional catalysts for GM stock in the near future.

Related Link: Citi: General Motors Is Worth $50/Share After Buyback Reveal

While much of the trading in response to the buyback announcement was "sell on news" trading, analysts also believe that a large part of the market still doesn't trust GM's true value.

Analysts believe that the next major catalyst for the stock will come from executing operations, demonstrating consistent earnings, and gaining back the trust of the market.

Turning The Corner

Analyst predict that it will take several quarters of consistency for GM to fully shake the "value trap" stigma. However, they believe that GM is further along in the process than many investors realize.

"We think GM is steadily turning the corner- it deserves credit for improving operational execution, it is listening to investors, its margin trajectory in NA is more positive than Ford, and Europe is turning around," analysts explain in the report.

Outlook

Analysts are modeling $800 million in buybacks per quarter for GM throughout the remainder of 2015.

Barclays raised its 2015 earnings estimates by 2 percent and its 2016 earnings estimates by 9 percent on the buyback news. Barclays has an Overweight rating on GM and a $44.00 target for the stock.

Latest Ratings for GM

DateFirmActionFromTo
Jan 2017Daiwa CapitalDowngradesNeutralUnderperform
Dec 2016BMO CapitalInitiates Coverage OnMarket Perform
Dec 2016MacquarieInitiates Coverage OnOutperform

View More Analyst Ratings for GM
View the Latest Analyst Ratings

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