Near-term concerns about electric car sales are mounting. While the electric vehicle (EV) market in the U.S. is still growing, the pace of growth has slowed considerably due to higher interest rates, concerns about public charging, and increased consumer interest in gasoline-electric hybrid vehicles.
With that backdrop, Mizuho Financial Group cut its ratings on several pure electric vehicle makers late Sunday. But at the same time, it boosted its price target for General Motors (NYSE: GM).
Why Mizuho likes GM better than pure EV makers
In a note downgrading several EV makers, Mizuho analyst Vijay Rakesh wrote that while he thinks widespread EV adoption is likely in the long term, there are near-term concerns about consumer demand for purely electric vehicles. The bank's analysts recently cut their forecast for EV sales growth in 2024 to 15% from 25%, he wrote.
Against that backdrop, Rakesh is a bit more bullish on GM. He wrote that he continues to favor GM's gradual EV launch strategy, and notes that GM's sales of high-profit internal-combustion vehicles remain strong. He boosted the bank's price target on GM to $48, from $44, implying a roughly 10% upside over the next 12 months from current levels, while maintaining its previous "buy" rating.
EV demand is sluggish now, but GM has an answer to that
EVs are the future. I think that's obvious to most investors now. But at the moment, that future is looking a bit more distant than it did a couple years ago, for the reasons I mentioned above.
In that light, I think Rakesh is right. There's a lot for investors to like about GM today, and that's why the stock is already up about 21% so far in 2024.
Yes, GM has struggled with embarrassing software glitches on its newest EVs. But its underlying EV battery and motor technology appears to be quite qood. And the strong cash flow it's still generating from gasoline-powered trucks and SUVs will give GM time to get its next EVs right -- and to pace itself as it transitions away to that eventual fully electric future.
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John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
