Morgan Stanley Upgrades General Motors

Morgan Stanley upgraded General Motors (NYSE: GM) to Equal-Weight and raised its price target to $54 per share. The upgrade is based on improved fundamentals and strategic operational adjustments.

Analysts observed an increase in normalized earnings due to reduced losses from GM's China joint ventures and its Cruise division, along with robust margins in ICE vehicles.

> “There have been several material developments on GM since our September downgrade that have demonstrated improved execution and capital discipline,” stated Morgan Stanley (NYSE: MS).

Recent developments include:
– Strong Q3 results and an improved outlook.
– Sale of a 50% stake in a Michigan battery plant.
– Impairment/restructuring of the Chinese JV.
– MOU with Hyundai (OTC: HYMTF) for collaboration exploration.
– U.S. election results extending the useful life of ICE-related assets.

Morgan Stanley also elevated its bull case target for GM from $72 to $80, indicating potential long-term gains.

In contrast, Tesla (NASDAQ: TSLA) remains Morgan Stanley's Top Pick, with a price target raised from $310 to $400 per share. The investment bank noted growing investor enthusiasm surrounding Tesla's roles in AI, renewable energy, and trends of onshoring, all hinting at broader market expansions.

> “Elon Musk's entry into the political sphere has expanded investor thinking around Tesla's fundamental outlook,” remarked the bank.

Morgan Stanley predicts an increase in Tesla's leadership in autonomous and electric mobility sectors amidst evolving U.S. policies, solidifying its industrial position.

Overall, the auto sector is expected to face challenges in 2025, influenced by changing U.S. policies, tariff impacts, and the transition to electric and autonomous vehicles. Morgan Stanley projects a modest growth in U.S. auto sales, expecting a base case SAAR of 16.3 million units. EV penetration may temporarily dip before rebounding.