​​Ford Isn’t Tesla Yet And Shouldn’t Be Trading Like An EV Stock, Jefferies Says

top line

It’s too soon for investors to value and trade in older automakers like Ford as electric car stocks, according to Jefferies analysts who recently downgraded the company’s stock warning there is limited upside ahead.

key facts

Ford shares fell 0.5% to nearly $22 a share Thursday despite a downgrade of Jefferies analysts, who warned that the stock may have benefited on its own.

Analyst Philippe Hoshua lowered Ford’s rating from a “buy” rating to “hold” noting that the stock had limited upside after a hot streak that sent the stock up more than 130% in 2021.

Although the company is making solid progress with its electric-vehicle ambitions, it’s too soon for investors to trade in Ford stocks like EV, he argues.

The Jefferies analyst later hesitates to set a higher valuation multiple for Ford’s stock, noting that the company remains vulnerable to production problems stemming from the pandemic and shortages in semiconductors.

Ford’s stock has repeatedly risen to beat most analysts’ estimates, causing them to either downgrade the stock or adjust price targets: Despite the rating downgrade, Houchois raised the target price to $25 per share from $20 per share.

After the surge in prices, the shares are still “in good shape and in good hands,” according to Hoshua, who likes the direction the company is heading under CEO Jim Farley.

Surprising fact:

Shares tumbled nearly 8% Wednesday after Ford revealed that a $900 million gain from its investment in public electric truck company Rivian recently won’t be included in its full-year financial results. The company primarily revised guidance on annual revenue, which fell slightly due to an accounting change related to the timing of Rivian’s initial public offering in November.

basic background:

Ford’s stock is still up nearly 230% since auto industry veteran Jim Farley took over the company in October 2020. On top of helping to repair the company’s balance sheet, Farley’s plan to restructure Ford+, which focuses more resources On electric cars, investors and analysts alike are welcomed. Ford sold more than 27,000 electric Mustang Mach-Es in 2021, while the all-electric F-150 pickup truck will begin shipping to customers soon. Amid higher-than-expected demand for the F-150 Lightning, Ford has already had to double its production targets for the car several times in recent months.

Critical quote:

We think it is too early to reassess the legacy [auto manufacturers] As for their progress in the electric vehicle because profits are still mostly driven by cyclical shortages, returns remain within historical parameters, and the EV transition is largely a zero-sum game to begin with,” according to Jefferies analyst.

What to watch:

Jefferies likes so many other automakers that the company believes they provide more upside for investors looking to take advantage of the transition to electric vehicles. Houchois sees Stellantis, formerly known as Fiat Chrysler, as a “catch-up” and has a “buy” rating for the stock. He still sees Tesla as an “industrial threat,” however, giving electric car maker Elon Musk a “buy” rating and a price target of $1,400 per share – which is 35% higher than current levels.

the shadow:

After Jefferies’ recent downgrade, less than half of Wall Street analysts covering Ford gave the stock a “buy” rating. The average analyst price target is around $22 per share – slightly lower than where the stock is currently trading.

In-depth reading:

Ford surpasses $100 billion market valuation as stocks soar thanks to hot electric car plansForbes)

Ford stock rises 11% as company aims to challenge Tesla’s dominance of electric vehicles (Forbes)

Rivian shares drop 15% in two days after Amazon signed a deal with a competitor (Forbes)

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