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Citigroup Downgrades Ford, Chooses General Motors For 2015

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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).”

Related Link: Morgan Stanley: General Motors Is Due For A 'Mean Reversion'

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.

Ford Downgrade

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

DateFirmActionFromTo
Feb 2019Initiates Coverage OnBuy
Jan 2019MaintainsOutperformOutperform
Dec 2018Initiates Coverage OnBuy

View More Analyst Ratings for GM
View the Latest Analyst Ratings

Posted-In: Autos CitigroupAnalyst Color Long Ideas Downgrades Price Target Analyst Ratings Trading Ideas Best of Benzinga

 

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