Nomura analyst Anindya Das downgraded Ford stock to Sell from Hold Tuesday. His price target goes to $13 from $13.30 a share.
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Stock in Ford Motor caught a downgrade Tuesday because fighting in the coming electric-vehicle wars is going to be very expensive. That might not be great for profits.
Nomura analyst Anindya Das downgraded Ford (ticker: F) stock to Sell from Hold Tuesday. His price target goes to $13 from $13.30. Both the old and new targets are far below where the shares trade, and the downgrade isn’t impacting shares all that much Tuesday. Ford stock is up about 0.5% to $18.04. The S&P 500 and Dow Jones Industrial Average have added 0.3% and 0.4%, respectively.
In the short run, Das is worried about Ford market share coming out of the 2021 semiconductor shortage that is now constraining global auto production. “ Toyota , for instance, has indicated that November 2021 production would be an all-time record high for the month,” wrote Das.
Ford, on its third-quarter call, said volumes should rise about 10% sequentially in the fourth quarter. That implies about 441,000 deliveries in North America for the quarter. Growth is good, but that would still be short of the roughly 543,000 delivered in the fourth quarter of 2020. Das is concerned that other companies, such as Toyota, are managing the chip shortage better than others, including Ford.
In the long run, Das is worried about electrification costs. Ford has committed to roughly $30 billion for vehicle-electrification spending by 2030. “The majority of the spending burden will occur during 2022/2023,” wrote Das. “This is likely to lead to [year over year] structural cost increases for the company, thus pressuring margins.”
Ford is spending a lot on EVs, like many other auto makers. General Motors (GM) is spending about $35 billion over the same span. What’s more, according to Barron’s calculations, global auto makers with about 50% global light-vehicle market share have announced more than $200 billion in EV spending happening between today and the end of the decade.
That’s a lot of spending. Not all of the capacity expansion will go smoothly and not all of the new EV models will be winners. Das, as a result, is taking a conservative approach with his Ford rating, but he rates GM stock at Buy with a $66 price target.
His $66 price target on GM works out to about 10 times the 2022 consensus earnings-per-share estimate of $6.87. His $13 price target for Ford stock is about seven times estimated 2022 consensus EPS of $1.90. But Das’ EPS estimate is below the Street for Ford. He projects $1.54 in 2022 EPS, after cutting 17 cents with the downgrade.
About 57% of analysts covering Ford stock have Buy ratings. The average Buy-rating ratio for stocks in the S&P 500 is 55%. Now about 13% of analysts rate Ford at Sell. The average Sell-rating ratio for the S&P 500 is less than 10%.
The average analyst price target for Ford stock is about $17.66 a share, right around where the stock is trading.
Ford stock approximates the analyst price targets because shares have had a great year. The stock is up more than 100% year to date, and 25% over the past month.
Strong third-quarter earnings helped propel shares higher in October. The company also will resume paying a quarterly dividend in the fourth quarter.
Write to Al Root at [email protected]
