Bank Of America Just Released A New Auto Report (And They Discussed Ford, GM & Tesla)

Bank of America issued an Automotive Sector report this Friday with a focus on valuation.

Analysts, led by John Murphy, said he believed that valuation “is one of the most important fundamental factors that should be considered when buying or selling the stocks in our coverage universe.

He added: "However, given the extreme volatility in certain links of the auto value chain, investors should be cognizant that the stocks are very sensitive to headlines and swings in expectations, especially in the short term.”

The report cited several overall downside risks including input costs, gas prices, changes in management, dealer network problems, burdensome regulations, supply base disruption and price pressures.

Below are highlights on three automakers along with ratings and price targets.

Ford Motor Company F - Buy, $20 price target

According to the report, the price target was “based on an 2015 EV/EBITDA multiple of roughly 4.5x, around the middle of the company's historical range given the continued recovery in NA and the beginning of recovery in F's international markets.”

The target implied a “P/E of 12x our 2015e EPS, toward the higher end of the historical range, but is only 9x 2015e EPS after adjusting for non-cash taxes.”

Ford Motor Company recently traded at $15.35, down 1 percent.

General Motors Company GM - Buy, $50 price target

The target was based “on an EV/EBITDA multiple of about 4x, which is just below the company's normal historical range and is a P/E of about 10x our 2015E EPS, which is at the higher end of the company's historical range.

General Motors Company recently traded at $34.77, down 0.39 percent.

Tesla Motors Inc TSLA - Underperform, $75 price target

The target was “based on an adj. EV/EBITDA multiple of approx. 15X our 2016e, at a premium to a comp set of 35 technology-related companies. We have focused on 2016, as we believe it should represent a more normalized earnings and cash flow year for Tesla.”

Upside risks, analysts said, included: “1) better-than-expected execution and cost containment, 2) a sharp and sustained rise in gasoline prices, 3) a breakthrough in advanced battery technology, 4) increase in Federal or State incentives."

Tesla Motors Inc recently traded at $215.85, down 2.95 percent.