CFRA analyst Garrett Nelson recently downgraded General Motors Co.'s (GM) stock rating from neutral to "strong sell." This shift in perspective is primarily due to the increased potential of a strike from the United Auto Workers (UAW). In tandem with this downgrade, Nelson also adjusted his 12-month price target on GM stock, setting it at $28, down from $40, predicting a 24% drop from current prices.
The primary concern prompting this strong sell recommendation stems from the seemingly insurmountable differences between the company and the union during ongoing labor negotiations leading up to the September 14 contract expiration. As Nelson elaborated, "We move to strong sell on the growing risk of a UAW strike, given reports that the company and union remain extremely far apart in labor negotiations."
Furthermore, CFRA expresses caution regarding the immediate impact on earnings resulting from GM's electric vehicle (EV) transition, coupled with the unforeseen demand for new models amidst an oversaturated EV market.
Despite these challenges, it's worth noting that GM's year-to-date performance showcases a 10% gain, albeit falling short of the S&P 500 index's 19% advance.
In summary, CFRA's downgrade decision reflects concerns over the looming UAW strike risk and apprehensions about GM's ability to navigate its EV transition and succeed in an increasingly saturated EV market.
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