Investment banking firm Goldman Sachs has reinstated coverage on General Motors stock, presenting a “Buy” rating and setting a $35 per share price target — roughly 28 percent higher than the current share price. However, the rating only takes effect once GM completes its repurchase of 200 million shares owned by the U.S. Treasury, a process that is expected to be completed in the next few weeks.
Sachs expects a 17 percent Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) from GM in 2013 that will be driven by an increase of margins in North America to the level of Ford, as well as an improvement of profitability in Brazil. In addition, Sachs also cites GM’s major product offensive, sales volume improvements, as well as small improvements in input costs in 2013.
Following GM’s share buyback, Goldman raises earnings per share estimates by 11 and 10 percent for 2013 and 2014 to $4.49 and $5.36, respectively. The forecast is above the Wall Street consensus of $3.82 and $4.81 per share for 2013 and 2014, respectively.
GM stock closed Monday at $27.66, a 0.34 point/1.24% rise.