General Motors Company (NYSE:GM) plans to restructure its joint venture with SAIC General Motors Corporation after losing $210 million in this year's first half, but an analyst thinks the automotive giant shouldn't even bother.
"We note that GM announced plans to restructure its operations in China," Bank of America analyst John Murphy said in a note.
"We are concerned the pressure in China is more structural than transitory due to excess capacity and continue to believe GM should exit the market."
Also Read: GM Reports $210M Loss In China Joint Venture: 'The Headwinds Are Not Easy'
Murphy also said that China "remains a material drag on relatively good performance in other regions" of the world where GM is having better sales as it invests in developing electric vehicles (EVs) and autonomous vehicles (AVs).
Bank of America reiterated a Buy rating and maintained a price target of $85 on GM, which beat revenue estimates for the second quarter.
"Our Buy rating on GM is predicated on our view that the company remains a leader among the industry in its Core to Future transition," Murphy wrote.
"More specifically, GM's ongoing execution and strength in its Core business continues to enable the company to step up its investments across EVs and AVs, further Future-proofing the business."
Goldman Sachs maintained a Buy rating that it has had on GM since July 2020, pointing out that the company is launching eight new or redesigned sports-utility vehicles in North America in this year's second half.
"Moreover, GM continues to focus on cost and said it remains on track to achieve its net $2 bn cost reduction plan by the end of the year," Goldman Sachs analyst Mark Delaney wrote.
Murphy noted that GM's total company revenue of $48 billion for the second quarter was up about 12% from the first quarter and up about 7% from a year ago, beating Goldman Sachs' estimate of $44.5 billion and Wall Street consensus of $45.1 billion.
Price Action: GM declined 4.82% to $44.25 as of Thursday's mid-morning trading, while exchange-traded funds that track the company showed gains and losses.
- First Trust Nasdaq Transportation ETF (NASDAQ:FTXR) declined 0.63%
- Invesco S&P 500 Pure Value ETF (NYSE:RPV) inched up 0.01%.
- IShares U.S. Manufacturing ETF (NYSE:MADE) slipped 0.29%.
- IShares MSCI USA Value Factor ETF (VLUE) gained 0.28%.
- Brandywine Global – Dynamic US Large Cap Value ETF (NASDAQ:DVAL) went up 0.26%.
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