The week is off to a bad start for Ford and General Motors. After their stocks have been downgraded to Sell by UBS analyst Patrick Hummel, Ford’s shares dipped around 7% while GM saw its own shares plunge more than 5%.
Hummel based his evaluation on the bleak outlook for the car sector in 2023. According to the analyst, demand destruction is “inevitable,” and the carmakers will soon face bloated inventory and an inability to meet the sales quotas.
“We think it will only take 3-6 months for the auto industry to end up in oversupply, which will put an abrupt end to a 3-year phase of unprecedented OEM [original equipment manufacturer] pricing power and margins,” Hummel explained in a note sent out to clients.
Adjusting Ford’s previous rating of Neutral to Sell, Hummel set a price target of $10 per share, which represents 23% less than his previous estimate. Ford’s stock is sitting at $11.33 on Tuesday, being down close to 50% year to date.
GM stock also had its Neutral rating changed to Sell but received less favorable treatment. Hummel had a $38 per share price target on General Motor shares compared to the current price of $32.01. GM stock is 47.7% down year-to-date.