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Bank of America thinks the announcement by General Motors Company (GM) of its intention to idle production at an Indiana plant as inventories grow is a reason to buy the stock, not sell shares.
As part of its announcement, the Detroit automaker noted that its inventories have increased over the past month as production has improved with the easing of supply-chain issues while demand has stayed fairly consistent.
Analyst John Murphy: “While we understand these concerns, we are encouraged by the news as it supports our thesis that the automakers will be more disciplined on production as they focus more on pricing and profits.” Murphy also said the short-term EPS impact is manageable Looking further down the road, BofA kept a Buy rating on GM on the view that the company remains a leader in the industry with its “Core to Future transition.”
The ongoing execution and strength in the core GM business is seen as crucial as it continues to enable the company to step up its investments across electric vehicles and autonomous vehicles in order to future-proof the business. As part of its bullish thesis, BofA also believes the efforts by GM to continue to develop all the necessary components for the future of mobility services will unlock value over time.
BofA’s price objective of $70 on GM reps more than 75% upside potential for the auto stock. Read the latest breakdowns on GM from Seeking Alpha authors.