Two major automakers have caught the eye of UBS as a new analyst takes over coverage of the sector. Analyst Joseph Spak starts his coverage of Ford and General Motors with buy ratings. Before he became the analyst covering the industry, UBS had a sell rating on Ford and neutral rating on GM. Both stocks have underperformed the S & P 500 this year. His $15 price target for Ford implies an upside of 20.5% over Tuesday's close. Ford, which climbed 1.6% before the bell Wednesday, has underperformed the market year to date with a 7.1% advance. The S & P 500 is up 16.2% during the same period. Spak said Ford's pro business, its commercial segment, should show more resiliency than expected. That can mitigate downsides from issues in the blue and electric car models, he added. He said the pro software should provide long-term upside, with upgrades considered easier to ask for because they are tied to return on investments. Spak noted that the company has an approximately $20 billion opportunity through upgrades and price increases. On the other hand, GM shares have "concerns priced in and overdone in our view," he said. Despite adding 1.1% in Wednesday premarket trading, GM is down 0.5% year to date. Spak's $44 price target for shares signals a 31.5% upside. The North American portion of the business should be able to keep margins between 8% and 10% as pricing risks are already anticipated, Spak said. The analyst added that GM has done more than many competitors to improve its battery and raw materials supply chain, which he said, "should pay future dividends." Both stocks trade at 2.5 times their 2025 enterprise value to EBITDA, which Spak said is at the low end of their trading ranges due to the industry cycle and electric vehicle risks. F GM YTD mountain Ford and GM in 2023 — CNBC's Michael Bloom contributed to this report.
