General Motors Stock Plunges After Earnings, Analyst Warns of Continued Weakness
General Motors (GM) stock has taken a significant hit after the company's latest earnings report revealed disappointing results. The auto giant's shares plummeted 11% on Tuesday, marking their worst performance since March 2020. The stock has continued to decline, shedding another 1% in midday trading on Wednesday.
The decline comes despite GM's strong performance in recent years, which saw the stock gain 50% in 2024. The company had aggressively cut costs and repurchased stock, boosting its profits and supporting its share price.
However, analysts are now questioning GM's ability to maintain its momentum. In a note to clients, BofA auto analyst John Murphy attributed the stock's sharp sell-off to "a lack of new share buyback announcement." GM had previously announced plans to repurchase over $11 billion in stock in 2023, but the company did not provide any guidance on future buyback activity.
Murphy also identified several other factors that could weigh on GM's stock in the near term, including:
* Policy uncertainty: Tariffs, inflation reduction act incentives, and emissions standards remain sources of uncertainty for the auto sector.
* Negative product mix: GM's sales in the fourth quarter were affected by a shift towards lower-margin vehicles.
* Price declines: GM's outlook for vehicle price declines is higher than its previous estimates.
* Slow sales growth: The company's flat volume outlook has disappointed investors.
Additionally, the company's assumption of a "stable" policy environment has raised concerns among investors who are wary of recent policy changes by the Biden administration. GM's full-year 2025 earnings per share guidance did not factor in the potential impact of additional tariffs.
Brian Sozzi, Executive Editor of Yahoo Finance, believes that GM's stock could remain depressed until further clarity is provided on these issues. He noted that GM's management team has acknowledged the potential impact of tariffs but has expressed confidence in its ability to mitigate the effects.