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GM Stock Catching Up With Ford

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On: Wed, Dec 29, 2010 at 4:43PM | By: Sherry Christiansen


 GM Stock Catching Up With Ford

 On Wall Street, there’s an ongoing grudge match that has to do with stock prices. This is the GM versus Ford battle royale. Lately, Ford has had the playing field all to itself as it has rebounded with impressive sales figures over the last several quarters. Meanwhile, GM was benched on the sidelines while it was sorting out its bankruptcy mess. Now with their public offering up and running, GM stock is rising in value. Some analysts are now saying GM stock is a better bet than Ford stock. Go figure.

Credit Suisse analyst Christopher Ceraso has given GM its first “buy” rating since coming back onto the market. Ceraso elaborated in a research report by stating that “GM trades at a deep discount to Ford, but the valuation gap should narrow substantially over the next few years thanks to GM's aggressive product-development cycle.”

On the other side of Wall Street, UBS analyst Colin Langan declared that “Ford is the better stock because its upcoming vehicle lineup is superior. We expect Ford's better product launch schedule will drive share gains at GM's expense.”

Mr. Ceraso based his favorable rating on GM’s “refresh rates.” He explains these rates as “the percentage of U.S. sales that come from either redesigned vehicles or heavy facelifts.” Right now, Ford is actually winning the refresh rates race with a whopping 26% of their sales compared with GM’s 14%.

Ford plans to hold on to that refresh rate lead when they launch their 2011 Ford Focus. But coming up in the rearview mirror will be GM who is prepping the launch of their restyled Chevrolet Malibu, Chevy Spark minicar, and two new Cadillac models in 2012. If all goes according to projections, GM’s refresh rate will bounce to a hefty 30% while Ford lingers at 19%.

“GM's product cycle, while relatively anemic in 2011, will accelerate sharply in 2012 and 2013, about the same time that Ford's product cycle shifts into lower gear,” said Ceraso as he continued to sing the praises of GM’s rebound effort.

GM’s stock tick up by 66 cents, or 1.9%, to close the day at $35.26 on the New York Stock Exchange. Meanwhile, the U.S. government has gotten back $23.1 billion of its initial GM bailout money with the selling of stock in last month’s offering. If they wanted to, the feds could break even if they sell off their remaining 500 million shares when the stock hits $53. According to analysts that could be very doable in the foreseeable future.

Update; Today there was another rise of 2.1% in GM stock prices.




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