By Senad Karaahmetovic
UBS analysts downgraded shares of Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) to Sell and Neutral, respectively, as he sees risk to earnings.
The analysts cut Ford to Sell from Neutral and lowered the price target to $10 from $13 per share as they believe the risk to earnings and free cash flow is "under-estimated." As Ford already warned for Q3, the analysts believe the bar is now "very high" for Q4.
"Ford has one of the least attractive risk/reward profiles amongst Western OEMs on a 12-month view, which is why we downgrade to Sell," the analysts wrote in a client note.
Similarly, GM shares are downgraded to Neutral from Buy with the price target lowered the $38 from $56 per share. The analysts expect things to get "stormy in 2023," hence the downgrade move.
"While we continue to like GM's EV momentum in 2023 with a strong (IRA-compliant) launch pipeline, the overall sector outlook for 2023 is deteriorating fast so that demand destruction seems inevitable at a time when supply is improving. We believe this will likely lead to a paradigm shift from under- to oversupply and consequently, a price & mix led drop in margins. We expect EPS to more than halve next year," the analysts added.
UBS analysts also made a series of downgrade moves in the firm's coverage of Europe's Auto stocks. Volkswagen (OTC:VWAGY) and Renault (OTC:RNLSY) were both downgraded to Neutral from Buy on oversupply concerns.
Ford and GM shares are down 5.9% and 4.8%, respectively, in pre-open Monday, as of 08:45 ET (12:45 GMT).