Piper Jaffray Initiates GM With Overweight Rating, $41 Target

Piper Jaffray’s Alexander E. Potter believes General Motors Company GM shares are currently offer cheap valuation, stable outlook and attractive dividend yield of 5.1 percent.

Potter initiated coverage of the company with an Overweight rating and price target of $41.

U.S. Auto & Truck

The analyst believes while investors are pessimistic regarding the U.S. auto and truck cycle already being reflected in the stock’s valuation, General Motors “should have no trouble defending 10+ percent margin in North America.”

Related Link: Piper Jaffray Likes Ford's Big Balance Sheet, Starts At Overweight

However, Potter also pointed out that in comparison to Ford Motor Company F, General Motors does not appear to have the same outlook for margin expansion in Europe.

The U.S. represent the largest market for General Motors and therefore the U.S. truck and auto market is expected to be a stable source of income for the company.

Potter pointed out that “in terms of new-vehicles-per-capita, the U.S. auto market remains under-saturated, at least relative to historical norms. With this in mind, we expect a ‘plateau’ not a ‘peak’.”

Value Stock

General Motors currently trades at a lower multiple than Ford Motor, since the former lacks most of the growth drivers available to the latter.

“But that doesn't mean the stock is a bad value. GM also offers a more aggressive buyback program than does Ford, and the company's captive financial services company has more scope for expansion,” Potter noted.