Goldman puts GM shares on recommended stock list
Goldman Sachs analyst expects strong returns from GM shares on buyback and better earnings
NEW YORK (AP) -- Goldman Sachs put General Motors on its recommended stock list Wednesday, pointing to a strengthening business and the Treasury Department's agreement to sell the rest of its stake in the company.
THE OPINION: Analyst Patrick Archambault reinstated a "Buy" rating on GM shares and placed the stock on the Americas Buy List, a portfolio of highly recommended stocks. He set a price target of $35. GM shares last traded at $35 in February 2011. The company had exited bankruptcy protection in July 2009 after the government had stepped in to prop up the company.
Goldman Sachs expect GM to report strong earnings growth in 2013 as profit margins North America improve and business in Brazil becomes more profitable.
On Dec. 19 the U.S. Treasury Department said it will sell its remaining stake in General Motors by early 2014, with GM buying back 200 million shares by the end of 2012. The government will sell its last 300 million shares over the next year to 15 months. Archambault noted that the company's lower share count will boost its net income in the next few years: he now expects GM to earn $4.49 per share in 2013, while FactSet says analysts expect $3.89 per share on average.
The U.S. government bailed out GM in 2008 and 2009, allowing the company to go through bankruptcy and deal with large debts, high labor costs, and a weak lineup of cars instead of being sold off in pieces. The government began selling off its stake in November 2010 with an IPO of 412 million shares. That offering priced at $33.
THE STOCK: General Motors Co. lost 5 cents to $27.61 in morning trading. The stock has been trading around annual highs, peaking at $27.95 Wednesday morning. Archambault's price target suggests an increase of 26.5 percent in GM's stock price.
