General Motors Company (NYSE:GM) shares have struggled in recent months because of President Trump's tough trade rhetoric with China, but Morgan Stanley thinks another one of the president's proposals could be bullish for the automaker. Specifically, the brokerage firm expects an uptick in pickup truck sales thanks to bigger infrastructure spending over the next decade -- which they predict could be as high as $2.4 trillion in total. The firm upgraded GM stock to "overweight" from "equal weight" and lifted its price target to $48 from $45.
Shares of GM are trading up 2% at $38.44 this morning, as they try to move past recent resistance in the $38 region. Roughly two weeks ago the security bounced near the $35 level, a 25% drop from its October high of $46.76 and home to long-term moving averages like the 36-, 48-, and 60-month trendlines. In other words, a technical floor could be forming at the convergence of these notable levels.
Call buying has remained the most popular options trading strategy in recent weeks, based on the automaker's 10-day call/put volume ratio of 2.52 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The May 36 call saw the largest increase in open interest during that time.
Looking closer at GM's options data, there's notable open interest of nearly 57,000 contracts at the June 45 call. Data from the major exchanges shows an abundance of sell-to-open activity here, however, so traders are actually expecting the stock to hold below $45 in the coming months.
Meanwhile, a number of other analysts share Morgan Stanley's upbeat outlook. The majority of covering brokerage firms say to buy General Motors, and the average 12-month price target stands up at $47.96 -- just a hair shy of Morgan Stanley's target.