After several investors asked him about the potential for a name change, Morgan Stanley analyst Adam Jonas said that he does not exclude the possibility of such an action being considered by General Motor’s (GM) leadership to help foster perception and cultural change.
SHOULD GM CHANGE ITS NAME?: While Morgan Stanley’s Jonas pointed out in a note to investors this morning that he has no knowledge or strong opinion on a potential name change, he does not exclude the possibility of such an action being considered by General Motor’s leadership to help foster perception and cultural change. The analyst noted that investors have asked him about the potential for a name change to accompany a “radical strategic shift for the company.” Several other household-name companies have tried to re-brand themselves recently. Michael Kors changed its name to Capri Holdings (CPRI) after completing its acquisition of Versace last month, and Weight Watchers announced that it would start going by WW (WTW). The famous handbag maker Coach also renamed itself as Tapestry (TPR), while Restoration Hardware became RH (RH) in early 2017.
GM TO HOST INVESTOR DAY ON FRIDAY: General Motors is hosting its Investor Day on Friday, January 11, prior to the Detroit Auto Show. While Morgan Stanley’s Jonas finds the timing “unusual” as he “cannot remember any auto company hosting a capital markets day prior to the Detroit show,” he believes it will help the company to control the narrative. Further, Jonas told investors that he expects GM to convey two important messages, namely challenges to near-term industry fundamentals and significant untapped opportunity on data. The analyst believes 2019 consensus could be at risk, as he expects significant declines in international profit and margin erosion in North American into an ex-growth global unit environment. Additionally, Jonas said he expects the company to reiterate previously announced restructuring measures as necessary to withstand market volatility and to make necessary investments in future technologies, partnerships, and business models. While he does not believe General Motors will be too specific regarding timing of a potential carve-out of its robotaxi unit, he expects management to communicate a strategy that reinforces the need for a separate unit. Late 2019 is rather early and 2020 is crunch time, Jonas added. Following Apple’s (AAPL) profit warning, slowdown in the Chinese consumer, and concurrent trade talks, the analyst thinks GM will address a range of fundamental and strategic issues around its China joint-ventures, and forecasts the China JVs account for most of the company’s cash flow in the region. Jonas has an Overweight rating and $44 price target on GM shares.
PRICE ACTION: In afternoon trading, shares of General Motors have gained about 1.5% to $34.88.
General Motors
+0.5 (+1.46%)
Apple
+3.23 (+2.19%)
Capri Holdings
+0.61 (+1.53%)
WTW
+0.01 (+0.03%)
Tapestry
+0.9 (+2.60%)
RH
+0.23 (+0.18%)