Bullish Analysts Give General Motors Shares a Boost

General Motors' Cadillac emblem
General Motors' Cadillac emblem

Shares of General Motors (GM) rose as much as 2.5% in trading Tuesday after several brokerage houses began coverage of the stock, with several issuing upbeat initial ratings and hefty price targets.

Analysts at Credit Suisse (CS), Morgan Stanley (MS), JPMorgan Chase (JPM) and Barclays Capital (BCS) all started GM at an overweight rating, the firms' highest, according to Dow Jones Newswires. Citigroup (C) and Bank of America's (BAC) Merrill Lynch unit initiated coverage with buy ratings. Privately held Soleil Securities also started coverage but with a hold rating.

The rush of new analyst coverage comes with the end of the 40-day quiet period barring analysts at banks involved in the automaker's initial public offering last month from commenting on GM. The IPO was the largest in U.S. history, raising more than $20 billion and reducing the federal government's stake in Detroit-based GM to about 33%, down from 61%.

More New Models Are a Ways Off

In conjunction with their new ratings, several analysts also issued bullish price targets on GM shares, ranging from the low $40s to as high as $50, coming from Morgan Stanley. At midday, GM's shares were trading at $35.30 each.

Analysts are upbeat on GM even as the automaker faces a difficult 2011, according to a report in The Wall Street Journal (subscription). Though GM just began production of the long-anticipated Chevrolet Volt gas-electric hybrid hatchback, another round of fresh product releases aren't expected until 2012.

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Those include a redesigned Chevrolet Malibu midsize sedan, an important component of the division's passenger-car lineup. A year later, GM plans to introduce redesigned versions of full-size Chevrolet and GMC pickups and sport-utility vehicles.

A trio of Citigroup analysts suggested the best time to buy auto stocks is ahead of new-vehicle introductions, criticizing a trend by industry experts "to dismiss an automaker's product cycle potential at the bottom and overestimate its sustainability at the peak."

GM has reported three profitable quarters so far this year and expects to report positive earnings before interest and taxes in the fourth quarter, "albeit at a significantly lower run rate than each of the first three quarters," the company said last month, adding that it also anticipates profitable year-end results in 2010.

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