Shares of General Motors (GM) are slipping after Morgan Stanley analyst Adam Jonas downgraded the stock to Equal Weight on valuation as he believes investor expectations about the company’s progress in next-generation automotive technologies may have gotten a “bit ahead of themselves.” Meanwhile, his peer at Citi raised his price target on the shares on potential upside ahead. This follows two upgrades earlier this month to buy-equivalent ratings.

MOVING TO THE SIDELINES: In a research note to investors this morning, Morgan Stanley’s Jonas downgraded General Motors to Equal Weight from Overweight following the stock’s 40% rise over the past year, which he attributes to investors having “finally noticed” the company’s “bold and difficult moves” to reposition the core business for a longer duration of success. However, the analyst argued that his thesis that General Motors could change the narrative and drive its share price higher has played out, and investor expectations may have gotten “a bit ahead of themselves.” Following discussions with a wide group of investors, Jonas pointed out that the consensus seems to be that the company is “substantially” ahead of the competition in the arena of fully autonomous transportation and expectations are also high on General Motor’s ability and willingness to unlock hidden value of such a business through strategic action. Moreover, he noted that market expectations for the value of such a move is “well in to the many tens of billions of dollars,” which greatly exceeds his estimates of $1B-$2B. While acknowledging that General Motors is still a “relatively inexpensive” stock, the analyst said he believes that its valuation is relatively fully valued when considering the point in the auto cycle and the valuations of other global auto peers. Furthermore, Jonas also highlighted the execution risk of a “highly ambitious” autonomous strategy.