Credit Suisse Upgrades GM, Puts Value At $38 Per Share

• General Motors Company GM shares have lost 13 percent over the past 5 trading days.
• Credit Suisse’s Dan Galves upgraded the rating for the company from Neutral to Outperform, while raising the price target from $37 to $38.
• While the company’s earnings power appears higher than was previously assumed, downside is now less severe, Galves stated.

Analyst Dan Galves believes that there are heightened cyclical concerns on the global Auto sector, which appear “over-stated” in the near-term. He added that General Motors’ risk / reward appear healthy, with the company’s FCF generation likely to continue to be robust longer than the Street expects.

“We see many company-specific factors that will likely support higher-than-expected earnings power, both at current volume levels, as well as trough,” Galves wrote.

The analyst pointed out that General Motors was able to outperform expectations in 2015, with 120 bps global margin expanding, despite flat volume growth and a trough product cadence. He believes that the company would be able to continue to beat Street expectations, backed by substantial material cost savings and a significantly improved product cadence in 2016 and 2017.

The EPS estimates for 2015, 2016 and 2017 have been raised from $4.80 to $4.85, from $5.40 to $5.45 and from $5.50 to $5.65, respectively.