Citigroup Analyst Lowers General Motors' Estimates; Expects Bigger Loss

Citing deepening problems for automakers selling in the United States, Citigroup Global Markets analyst Itay Michaeli has lowered his earnings estimates and price target for shares of General Motors Corp. (GM). The analyst said he now believes GM will report a loss of $14.39 per share for 2008, worse than the $6.95 per share loss he previously forecast.

He cut his price target for GM stock to $12 from $14, which assumes the Detroit carmaker successfully executes its turnaround plan and is able to bolster liquidity by the $15-billion through 2009 as planned. Mr. Michaeli estimates GM will burn through $15.3-billion in cash this year and $5.9-billion next year.

In a research note dated August 3, Mr. Michaeli said:

A larger than expected liquidity raise, other strategic steps or a continued decline in oil prices could prompt a share price recovery.

However, he cautions that a further deterioration in its sales mix away from its more profitable trucks and cars, or a failure to execute external financing plans, could call its mid-2009 liquidity into question, likely pressuring the shares further.

GM remains a very speculative stock that we rather avoid for the time being, and we find more appealing risk-reward situations amongst select automotive suppliers.