tesla
North America Equity Research
22 September 2014
US Automakers
See Attractively Deep Value in GM As We Roll Out
2016 Estimates for US Automakers; Like Ford;
Cautious on TSLA
We introduce our 2016 estimates and roll-forward valuation for GM and
Ford, finding +50% upside in the case of General Motors and +32% in the case of Ford. Our established 2015 price targets increase on newly considered
2016 earnings rather than 2015 in our valuation analysis and on capital structure roll-forward as the firms generate sizable cash flow. 2016 earnings are expected to rise relative to 2015, on industry tailwinds (continued trend toward more normal volumes in Europe, cycling past a period of atypically strong macro headwinds in
South America, robust growth in China, and continued cyclical increase in North
America even if at a lesser rate) as well as various different self-help initiatives
(e.g., as restructurings in Europe, Australia, and elsewhere take further hold, and on cost control efforts in North America). We reiterate our Overweight ratings on both GM and Ford, seeing more value in automaker stocks than in supplier stocks generally, on earnings that are growing almost as quickly as the average supplier over our newly extended forecast window (and at least as structurally improved relative to history) but valuation which is only in line with historical average
(Ford) or even significantly below (GM). We are more cautious on Tesla, however, with our Neutral rating balancing incremental news flow likely to track positive with valuation that appears stretched and execution and competitive risk that seems underappreciated.
Autos & Auto Parts
Ryan Brinkman
AC
(1-212) 622-6581 ryan.j.brinkman@jpmorgan.com Bloomberg JPMA BRINKMAN
Samik Chatterjee, CFA
(1-212) 622 0798 samik.x.chatterjee@jpmorgan.com David Karnovsky
(1-212) 622-1206 david.karnovsky@jpmorgan.com J.P. Morgan Securities LLC
We prefer automakers to parts suppliers:
22 September 2014
US Automakers
See Attractively Deep Value in GM As We Roll Out
2016 Estimates for US Automakers; Like Ford;
Cautious on TSLA
We introduce our 2016 estimates and roll-forward valuation for GM and
Ford, finding +50% upside in the case of General Motors and +32% in the case of Ford. Our established 2015 price targets increase on newly considered
2016 earnings rather than 2015 in our valuation analysis and on capital structure roll-forward as the firms generate sizable cash flow. 2016 earnings are expected to rise relative to 2015, on industry tailwinds (continued trend toward more normal volumes in Europe, cycling past a period of atypically strong macro headwinds in
South America, robust growth in China, and continued cyclical increase in North
America even if at a lesser rate) as well as various different self-help initiatives
(e.g., as restructurings in Europe, Australia, and elsewhere take further hold, and on cost control efforts in North America). We reiterate our Overweight ratings on both GM and Ford, seeing more value in automaker stocks than in supplier stocks generally, on earnings that are growing almost as quickly as the average supplier over our newly extended forecast window (and at least as structurally improved relative to history) but valuation which is only in line with historical average
(Ford) or even significantly below (GM). We are more cautious on Tesla, however, with our Neutral rating balancing incremental news flow likely to track positive with valuation that appears stretched and execution and competitive risk that seems underappreciated.
Autos & Auto Parts
Ryan Brinkman
AC
(1-212) 622-6581 ryan.j.brinkman@jpmorgan.com Bloomberg JPMA BRINKMAN
Samik Chatterjee, CFA
(1-212) 622 0798 samik.x.chatterjee@jpmorgan.com David Karnovsky
(1-212) 622-1206 david.karnovsky@jpmorgan.com J.P. Morgan Securities LLC
We prefer automakers to parts suppliers: