General Motors (GM) delivered a "clean" Q2 beat and raised its 2026 EBIT guidance, while offering positive commentary on 2027 outlook, Morgan Stanley said in a note Wednesday.

The report pointed to stronger pricing and cost management for the beat, and added that the higher EBIT guidance was driven by better pricing and improved warranty costs.

The note also said the first high level outlook for 2027 indicates growth in revenue, EBIT, and free cash flow due among others to improving EV profitability, and digital revenue.

However, the positive factors may be partially offset by the impact of higher commodity and computer memory costs as well as incremental tariff headwinds, it said.

Still, the report said its software and services business has the potential to drive a "significant" re-rating in the shares.

Morgan Stanley raised its price target to $101 from $100 while keeping its overweight rating on GM.

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