A preproduction model of the 2022 Ford F-150 Lightning Pro.
Courtesy Ford
Stock in Ford Motor is rising because new CEO Jim Farley is going fast.
The speed at which he is transforming Ford Motor (ticker: F) from a maker of gasoline-powered cars into a manufacturer of electrified, connected vehicles is impressing investors. Wall Street analysts say the auto maker is heading in the right direction.
Wednesday, Ford (ticker: F) held an investor event, where it outlined plans to spend $8 billion more on vehicle electrification between now and 2025. The incremental cash is mainly for capacity to build its own EV batteries with a joint- venture partner.
Vehicle electrification is a critical topic for all auto makers these days as investors, and car companies, have become convinced the future of commercial and personal transportation is battery powered. More spending is a positive, and Ford’s numbers compare favorably with those of any other traditional auto company.
Ford expects to have 40% of its auto sales coming from all-electric vehicles by 2030. Importantly, the company is aiming for its EV portfolio to be more profitable than its offerings of gasoline-powered cars.
All the EV news sent the stock up 8.6% to $13.90 on Wednesday. It was the stock’s highest close since July 21, 2016, when it closed at $13.92, and the largest percentage increase since June 5, 2020, when shares rose 11.7%, according to Dow Jones Market Data.
Analysts were impressed too. Some who don’t even cover Ford stock but do track Tesla (TSLA), such as Baird analyst Ben Kallo and Wedbush analyst Dan Ives, weighed in.
Both analysts rate Tesla (TSLA) stock at Buy. They didn’t weigh in on the outlook for Ford in their research reports following Wednesday’s, but did say that Ford’s strategic pivot into EVs shows that is where the future lies. Both, of course, expect Tesla to be a long-term winner. Kallo’s price target for Tesla is $736 a share, while Ives’s call is $1,000.
RBC analyst Joseph Spak, who does track Ford stock, upgraded the shares to Buy from Hold and lifted his price target for the stock to $17 from $13. Following the event, Spak has more confidence in the company hitting its goal of an 8% operating profit margin, which would be double the pre-pandemic 2019 figure of roughly 4%.
The improving health of the overall car industry is a big reason for his increased confidence, but the event “assuaged many of our BEV strategy concerns,” wrote Spak in a Thursday report, referring to battery electric vehicles.
Benchmark analyst Mike Ward already rated shares Buy. He raised his price target for the stock to $16 from $14 a share Thursday morning.
Ward, like Spak, called the day positive and said management’s electrification and profit plans appear realistic. Ford’s path to making EVs more profitable than its traditional vehicles includes controlling battery production, reducing the number of global design platforms—the underlying architecture of different models—increasing its manufacturing scale, and adding connected service-related sales.
Daiwa analyst Jairam Nathan is a little more cautious than those two. He rates shares Hold and has a $13 price target, unchanged after the event. He was impressed with the company’s plan for a commercial-vehicle service business, as well as the development of driver assistance functions, such as adaptive cruise control, that can be improved with software updates for a fee. Still, the latest information from Ford management wasn’t enough to move him off the sidelines.
Overall, with Spak’s upgrade, about 52% of analysts covering Ford rate its shares at Buy. That is just below the average Buy-rating ratio for stocks in the S&P 500, but it is a huge improvement from the start of the year, when about 20% of analysts covering Ford shares rated them Buy.
Ford shares were up another 6.9% in Thursday trading, likely because of the Wall Street upgrade. The S&P 50 0 was up 0.2%, while the Dow Jones Industrial Average had risen 0.3%
Write to Al Root at [email protected]
