Ford isn’t Tesla yet and shouldn’t trade like electric vehicle stock, this firm says

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Topline

It’s too early for investors to price and trade legacy automakers such as Ford like electric vehicle stocks, according to analysts at Jefferies who recently downgraded the company’s stock, warning there is little upside. the rise.

Highlights

Shares of Ford fell 0.5% to nearly $22 per share on Thursday despite a downgrade from Jefferies analysts, who warn the stock may have gotten ahead of itself.

Analyst Phillipe Houchois downgraded Ford from a ‘buy’ to a ‘hold’ rating, noting the shares have limited upside potential after a hot streak that sent the stock soaring more than 130% in 2021.

Although the company is making solid progress on its electric vehicle ambitions, it’s too early for investors to trade Ford stock as an electric vehicle company, he says.

The Jefferies analyst was later hesitant to assign a higher valuation multiple to Ford shares, noting that the company is still sensitive to production issues caused by the pandemic and the shortage of semiconductors.

Ford shares repeatedly beat most analysts’ estimates, forcing them to either downgrade the stock or adjust price targets: Despite the downgrade, Houchois raised its price target to $25 a share against $20 per share.

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

Surprising fact:

Shares fell nearly 8% on Wednesday after Ford revealed the $900 million gain from its investment in recently public electric truck maker Rivian will not be included in full-year financial results. The company essentially revised its full-year revenue forecast down slightly due to an accounting change related to the timing of Rivian’s IPO in November.

Key Context:

Ford shares have risen another roughly 230% since auto industry veteran Jim Farley took over as CEO in October 2020. As well as helping to repair the company’s balance sheet, the Ford+ restructuring plan Farley’s ongoing focus of more resources on electric vehicles has been applauded by investors and analysts. look alike. Ford has sold more than 27,000 Mustang Mach-E electric vehicles in 2021, while its all-electric F-150 pickup truck will soon begin shipping to customers. Amid higher-than-expected demand for its F-150 Lightning, Ford has already had to double production targets for the vehicle several times in recent months.

Crucial quote:

“We believe it is premature to reassess the legacy [auto manufacturers] for their advancements in electric vehicles, as profits remain primarily driven by cyclical shortages, efficiencies remain within historical norms, and the transition to electric vehicles is largely a zero-sum game to begin with,” according to the Jefferies analyst.

To monitor :

Jefferies likes several other automakers that the company says offer more upside to investors looking to capitalize on the transition to electric vehicles. Houchois considers Stellantis, formerly known as Fiat Chrysler, to be the “legacy catch-up” game and has a “buy” rating on the stock. However, he continues to view Tesla as the “industry threat”, giving Elon Musk’s electric vehicle maker a “buy” rating and a price target of $1,400 per share, implying a 35% increase from current levels.

Tangent:

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

Further reading:

Ford Surpasses $100 Billion Market Valuation as Shares Rise on Hot Electric Vehicle Plans (Forbes)

Ford shares rise 11% as the company aims to challenge Tesla’s electric vehicle dominance (Forbes)

Rivian shares plunge 15% in two days after Amazon inked deal with Rival (Forbes)

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