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"Buyer's strike" coming for autos, Morgan Stanley warns in cutting targets

Jun. 08, 2017 6:45 PM ETFord Motor Company (F) StockF, LEA, KMX, AZO, BWA, GPI, ORLY, AAP, SNA, ADNTBy: Carl Surran, SA News Editor142 Comments
  • Automakers and parts suppliers fell in today's trade after Morgan Stanley warned of an "unprecedented buyer’s strike," and sharply lowered its U.S. auto sales forecast for each year though 2020.
  • Morgan Stanley's Adam Jonas says tactics used to make new cars more attractive are lowering the prices of used cars, in turn pressuring sales of new cars, and will drop further beginning in 2019 since they will start to become obsolete as more new vehicles utilize electric engines and self-driving technology.
  • Jonas sees the 2017 U.S. annualized automotive sales rate, adjusted for seasonal trends, to reach 17.3M, down from its earlier expectation of 18.3M, with 2018 sales declining to 16.4M units vs. 18.9M previously and slowing to 15M in 2019 and 2020.
  • Jonas cut price targets on 15 companies, including Underweight rated Ford (NYSE:F) and Group 1 Automotive (NYSE:GPI) as well as Overweight rated Adient (NASDAQ:ADNT), and downgraded Lear (NYSE:LEA) to Underweight, expecting earnings to peak this year and to fall 20% by 2021.
  • Auto-related stocks of all kinds fell sharply today: AAP -3.6%, BWA -3%, KMX -2.7%, SNA -2.5%, ORLY -1.8%, AZO -1.3%.

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