ADVERTISEMENT
ADVERTISEMENT

A massive infrastructure bill could be just what GM investors need (GM)

General Motors stock hasn't had a good year. That may change on account of Trump's infrastructure bill.

  • That may change on account of Trump's infrastructure bill.
  • The bill could create higher demand for GM vehicle.
  • It could also add jobs, and subsequently lift disposable incomes to some degree.

It may be time to buy General Motors, Morgan Stanley analyst Adam Jonas wrote in a note to clients.

GM stock has been hit this year, down 9% year-to-date. Shares dropped sharply on President Trump's first mention of steel and aluminum tariffs in early March, and continued their slide for weeks after that.

Meanwhile, Trump is planning an infrastructure spending bill, which Jonas estimates would act as a tailwind for GM.

ADVERTISEMENT

"Our decision to upgrade GM is driven by our study of US infrastructure," Jonas wrote. He raised his price target from $45 a share to $48. Shares are hovering around $38 Monday. Morgan Stanley economists estimate infrastructure spending to total roughly $2.4 trillion over 10 years, an amount that would be great news for automakers.

"Greater long-term infrastructure spending typically coincides with increased pickup sales to complete the associated projects," the note said.

The spending would have a broader economic impact, which would also serve to boost GM's sales. "Those projects require workers, who will also likely benefit from heightened disposable personal income, potentially further increasing pickup sales," the note wrote.

Jonas believes that, since GM has a significant share of the US auto industry, the uptick in sales across the industry stands to benefit GM.

"Each 10% move in NA pickup production can be as much as 14% accretive to GM's 2019 EPS and 12% accretive to GM's 2018 EPS, adding $0.69 to EPS."

ADVERTISEMENT

Here's Morgan Stanley's graphic on the infrastructure bill's impact on demand for auto's.

GM is up 6% in the past week.

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.
ADVERTISEMENT

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng

Recommended articles

Here's everything to know about being a virgin on your wedding night

Here's everything to know about being a virgin on your wedding night

7 do's and don’ts of the Holy month of Ramadan

7 do's and don’ts of the Holy month of Ramadan

Top 5 sweetest celebrity mother-child relationships that stand out for us

Top 5 sweetest celebrity mother-child relationships that stand out for us

International Women's Day: 5 Nigerian female celebrities championing women’s rights

International Women's Day: 5 Nigerian female celebrities championing women’s rights

Top 5 female directors in Nollywood

Top 5 female directors in Nollywood

6 things that will break a Muslim's fast during Ramadan

6 things that will break a Muslim's fast during Ramadan

5 benefits of fasting during Ramadan

5 benefits of fasting during Ramadan

5 reasons Easter was more fun when we were children

5 reasons Easter was more fun when we were children

Dos and don’ts of supporting Muslims during Ramadan

Dos and don’ts of supporting Muslims during Ramadan

ADVERTISEMENT
ADVERTISEMENT