GM Weekly Notes: Sales Deceleration and Euro zone Concerns Smack Stock
GM’s (NYSE:GM) stock declined by almost 11% last week amid a spate of negative economic news and as the company reported lower than expected sales growth in U.S. in October. Last week, the stock witnessed its largest decline of more than 9% on Tuesday as GM announced a sudden slowdown in U.S. vehicle sales in October. Even though GM recorded impressive year-over-year vehicle sales growth in August’11 (up 18% yoy) and September’11 (up 20%) for the U.S., its yoy sales growth suddenly decelerated to 2% in October’11. [1] October sales of other major U.S. automakers like Ford (NYSE:F) and Chrysler also missed analyst’s October sales expectations though GM missed the expectations by the widest margin. [2]
See our complete analysis for GM stock here
On Wednesday, the Federal Reserve also cut U.S. economic growth forecasts over the next two years, signaling that U.S. automobile market could continue to remain under pressure going forward due to deteriorating consumer sentiment and stubbornly high unemployment rates. [3]
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Another reason for the steep stock decline on Tuesday was broad equity market sell off, which was triggered by deteriorating global economic outlook, as Greece announced a referendum on its bail-out package which increased the risk of the country’s sovereign debt default. [4]
You can drag the trend lines in the modifiable charts above to see the impact of these trends on GM’s stock value.
Our price estimate for GM stands at $27, implying around 15% upside to the current market price.
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