Barclays' analysts upgraded the stock ratings for both Ford (NYSE:F) and General Motors (NYSE:GM) from Equal-Weight to Overweight, citing "peak pain" from various business pressures that have led to historically low trading multiples. They set price targets at $14 for Ford and $37 for GM, despite the companies' respective 15% and 16% stock declines this year.
The analysts suggested that even a minor shift in sentiment could generate substantial gains for the automakers. They identified potential catalysts such as the resolution of strikes by the United Auto Workers (UAW) union and the anticipation of Ford and GM's FY24 EPS surpassing $1.50 and $6 respectively. Changes or progress with GM's Cruise could also be beneficial, while Ford's recent upgrade of debt to Investment Grade may act as a near-term catalyst.
Despite ongoing structural concerns including increased labor costs from a historic deal with the UAW, car pricing challenges, and the transition to electric vehicles, Barclays analysts maintain their price targets. These represent potential gains of 44% for Ford and 30% for GM.
The analysts also upgraded their view on the U.S. Autos & Mobility sector from Neutral to Positive. They favor GM over Ford due to worse sentiment on GM, providing easier reversion opportunities. Both companies have lagged behind the SPX YTD, but Ford has outperformed GM.
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