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Friday, December 31, 2010

Does UBS Have GM (NYSE:GM) Right? Bearish Outlook

It seems almost everyone has joined the bullish outlook on General Motors (NYSE:GM), even though there is very little within the company or the overall economy to justify so much optimism.

UBS (NYSE:UBS) appears to have a much more realistic outlook on GM, who they say has very little in terms of catalysts in the near term.

Part of the problem is the bias many of the companies have toward GM because they helped underwrite the IPO. The fact that they gave such a bullish outlook the day they were released to do it is suspect at minimum.

UBS noted these factors in their GM outlook: 1) cautious Q4 guidance; 2) a weak North American product launch schedule; 3) full-pension re-measurement at year end; 4) aggressive breakeven targets in Europe; and 5) slowing growth in China cause us to believe GM lacks near-term catalysts required to move the stock.

UBS has basically said that GM will miss EPS in their first report after going public again, and more than likely the share price will get hammered because of the unjustified optimism. That could in fact be the time to take a serious look at the company.

UBS maintains a "Neutral" rating on GM, which closed Thursday at $36.82, up $0.80, or 2.22 percent. UBS has a price target on GM of $37 a share.

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