GM shares fall as Morgan Stanley lowers guidance

(CercleFinance.com) - On Wednesday morning, GM shares were the second biggest loser on the S&P 500 index on Wall Street, penalized by a Morgan Stanley note in which the broker expressed concern about the deteriorating economic situation in China.


A little less than an hour after opening, the stock dropped 5.6%, compared with a 0.1% gain at the same time for the SBF 120.

In a study devoted to the US automotive sector, Morgan Stanley expresses concern about the "butterfly effect" resulting from the deterioration of the Chinese economy.

"China produces nine million more cars than it buys, which has repercussions on the Western competitive landscape", summarizes the broker in its note.

More generally, the broker underpins its decision with the prospect of market share losses for both GM and Ford, a less favorable price mix and the impact of the emergence of electric vehicles on automakers' profitability.

And while it points out that share buybacks have enabled GM to post the best performance in the sector this year, Morgan Stanley warns that their effect is now set to fade.

As a result, it has lowered its recommendation from 'in-line weighting' to 'underweight', with a price target reduced from $47 to $42.

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