What happened
An influential Wall Street analyst is out with a note saying he prefers Ford (F 0.08%) to General Motors (GM -0.04%), and investors appear to be heeding his advice. Shares of GM were down more than 5% on Wednesday morning as investors rethink their exposure to the auto titans.
So what
Morgan Stanley's Adam Jonas lowered his price target on GM to $30 from $42 on Wednesday, keeping an equal-weight rating on its shares.
Jonas cited last month's profit warning from Ford, saying it was "likely to be a bellwether event for the industry." Though General Motors did not follow with any guidance of its own on how supply chain constraints might have affected the quarter, Jonas said he is baking a reduction into his calculations.
The analyst also lowered the valuation of GM's China operations in his sum-of-the-parts calculation, and removed its investment in Cruise, an autonomous-driving start-up, from his calculation.
Now what
Jonas also upgraded Ford to overweight, saying he prefers it over GM right now due to relative valuations and Ford's work to transform itself into an electric vehicle powerhouse.
General Motors has begun a similar transformation, but Ford's warning late last month is a reminder that these things take time and are unlikely to be smooth. GM is taking the steps necessary to make sure it survives the ongoing shift toward electrification, and not go the way of the dinosaurs. But if Jonas is right, investors should expect to be traveling over some rough road in the quarters ahead.
