Ford just reached a market value of 100 billion dollars – why the stock can crash 52%

Winnings are constantly piling up for Ford (F).

Impressive orders for the new electric F-150. The Ford family Bill Ford buys a random share in a demonstration of trust. This week, the car giant’s market value broke through $ 100 billion, while rival GM (GM) remains neutral at around $ 89 billion. Despite these bad headlines, longtime car analyst Adam Jonas from Morgan Stanley believes that Ford shares have recovered.

How to move forward? The veteran number crusher said in a new note that he sees Ford shares plummeting 52% to $ 12. His rating on one of the hottest stocks in the market? Underweight, or equivalent Sell.

“The stock market̵[ads1]7;s attraction to Ford EV history continues to amaze us,” Jonas admits.

Wall Street’s newfound bullishness on Ford’s stock reflects the company’s ongoing operational turnaround operation under CEO Jim Farley and CEO Bill Ford’s pressure for greener cars. Solid earnings in the third quarter for Ford also helped.

Ford’s adjusted earnings for the third quarter came in at 51 cents per share, which breaks analyst estimates of 27 cents. Net sales of $ 33.2 billion beat analysts’ estimates by around $ 800 million despite the semiconductor shortage pushing production levels.

For the full year, Ford estimates adjusted profit of $ 10.5 billion to $ 11.5 billion. Previously, Ford expected earnings of $ 9 to $ 10 billion. The company also reintroduced dividends, which it had cut at the height of the pandemic in 2020.

Jonas claims that most of these factors are now priced into Ford shares, a stock that has skyrocketed by 155% in the past year. On the other hand, there are a number of downside risks in the Ford stock market that may be forgotten according to Jonas’ calculation.

“Our concerns begin with cyclical medium reversal. This is not just a Ford problem, but sector-wide. Although car companies will enjoy production recovery and inventory recovery, we believe this will be combined with price declines, deterioration of mix (channel and product) and increasing “From a $ 25 level, we believe that expectations of Ford’s success in electric cars, even if they are achievable, are difficult to exceed. We expect a far more intense competitive environment among electric cars from the likes of Tesla, Rivian, older OEMs and other startups. “

Ford just reached a market value of 100 billion dollars – why the stock can crash 52%

Ford boss Jim Farley poses with Ford F-150 Lightning pickup in Dearborn, Michigan, USA, May 19, 2021. Photo taken May 19, 2021. REUTERS / Rebecca Cook

But even Jonas admits that Ford’s stock may maintain its bullish skew in the short term.

“The opportunity window for the stock to enjoy a combination of a support cycle, strong ICE profitability (top pricing and mix) as well as the promise and excitement at upcoming EV launches can continue through the first half of this year,” adds Jonas. .

In other words, do not rule out more winnings.

Brian Sozzi is editor-in-chief and anchor in Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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