MORGAN STANLEY: GM has a chance to nail the 'Auto 2.0' revolution GM

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Self-driving cars are every car maker's dream market right now.

Owning a share of the "Auto 2.0" market before it takes off means company's shares would have the chance to rise along with the popularity of self-driving cars. Morgan Stanley's Adam Jonas thinks General Motors has just that opportunity.

In a research note sent out to clients on Wednesday, Jonas reinstates his firm's coverage of GM. His basic argument is that by starting new partnerships and ending some old ones, GM will be able to position itself to outpace competitors in the growing self-driving car market.

Jonas uses a sum-of-the-parts valuation to figure out how much GM shares could jump. By adding up what he thinks all aspects of GM's business are worth, Jonas comes to a market cap valuation of 60.36 billion, about 16.14 higher than its current valuation.

To get there, though, GM will have to make some changes. The company recently demonstrated its willingness to cash in the value of old assets. The company recently sold its Opel division in an attempt to narrow its focus. Opel was not one of GM's most valuable assets in the context of the connected self-driving cars.

According to Jonas, that is the type of transaction that will grow GM's business.

"After years of claiming the OPEL business was critical to the company's global platform strategy in small cars and diesel engines while suffering billions on losses , the company surprised the market with its decision to completely exit the business through the divestiture to PSA," he wrote.

Jonas called the move "highly significant" and said while neither he nor his team have any indications that GM's management is actively trying to sell off other parts of its business, they do think selling Opel signals the company's willingness to dump underperforming assets to better focus on the future.

Jonas also mentions the ability for GM to unlock value by focusing on improving its technology research.

GM vehicles travel roughly 2.5 billion miles a day, according to Jonas. That's enormous compared to Uber's 100 million miles and Tesla's 5 million miles. The problem is that GM records very little of the information that could be gathered from driving these miles. If the company could begin collecting driving data from a just portion of those 2.5 billion miles, it could use the information on its own or sell it for a profit.

Jonas issued a 40 price target for GM shares. The stock has fallen by 1.42 this year.

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