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GM Shares Tumble After Morgan Stanley Downgrades Stock on EVs, 2022 Guidance

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  • Shares of GM on Tuesday opened at their lowest point since September following Morgan Stanley's downgrade of the company's stock to equal weight from overweight.
  • The downgrade was due to GM's 2022 guidance coming in "well below" Morgan Stanley's forecast on top of concerns over the pace of the automaker's EV transition.
  • Morgan Stanley also lowered its price target on GM's stock to $55 from $75.

DETROIT – Shares of General Motors tumbled in early trading Tuesday, opening at their lowest point since September after Morgan Stanley downgraded the company's stock.

The Detroit automaker's 2022 guidance was "well below our forecast," Morgan Stanley top automotive analyst Adam Jonas wrote in an investor note, dropping the shares from overweight to equal weight. He also noted concerns over the pace of GM's transition to electric vehicles in lowering the bank's 12-month price target on GM's stock to $55 from $75, up 8.5% from its closing price Monday.

Jonas called the downgrade "the most significant estimate reduction" from Morgan Stanley regarding GM since the onset of the coronavirus pandemic in early 2020.

"We acknowledge the $20 reduction in our GM price target is significant and [is] paired by what we believe is a 'narrative change' in our outlook compared to our prior investment thesis," Jonas wrote.

GM shares fell by as much as 6.2% during intraday trading Tuesday to $47.58, off 29% from their 52-week high of $67.21 a share on Jan. 5. The stock slightly recovered throughout the day to close down by 2.5% to $49.46 a share. The stock's 52-week low is $47.07 a share.

GM's 2022 forecast includes an operating profit of between $13 billion and $15 billion, or $6.25 and $7.25 earnings per share, and net income of between $9.4 billion and $10.8 billion.

Morgan Stanley's revised its earnings-per-share forecast for GM is $6.64, a cut of roughly 11% from its previous forecast of $7.49.

Jonas said while GM "has big plans" for its new line of electric vehicles, there's "rising execution risk on an absolute and relative basis more than we previously believed." That could translate into a slower-than expected ramp-up of EVs in North America.

GM is targeting combined EV sales of 400,000 units in North America in 2022 and 2023, on its way to a production capacity of more than 1 million each for China and North America by 2025.

Morgan Stanley previously forecast GM would sell 114,000 EVs globally this year, followed by 600,000 in 2025, excluding a Chinese joint venture with Wuling that's selling a small EV in that market

Jonas has pushed the company to split its Ultium battery, EV and autonomous-driving operations from the rest of the automaker, which CEO Mary Barra has steadfastly refused.

Jonas also cited Barra's "One GM" strategy and slower-than-expected ramp-up in commercializing its Cruise autonomous vehicle unit as a reason for the downgrade.

Shares of GM are down by about 16% in 2021.

– CNBC's Michael Bloom contributed to this report.

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