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Vivek Kumar
Ford Motor

Ford Motors, an American multinational automaker, will invest 1.95 billion Canadian dollars in its Oakville and Windsor plants in Canada, Unifor union National President Jerry Dias said.

Unifor National President, Jerry Dias said: “I’m very pleased to announce that on behalf of the more than 6,000 members who work at Ford Motor Company, we have negotiated $1.95 billion of investments to retool the Oakville complex to build five models of electric vehicles and bring a new product to the engine plant in Windsor.”

“Today is an historic day. We are not only talking about solidifying the footprint of the auto industry in the short-term but for the long term. I think it’s fair to say that as an organization we hit a home run,” said Dias.

Dias added that up until today, of the $300 billion announced globally in EV investments as the auto industry transforms from combustible engines to battery-electric vehicles, not one nickel had been allocated Canada. But with today’s announcement, that changes.

Ford shares closed 1.31% lower at $6.78 on Tuesday; the stock is down about 30% so far this year.

Ford stock forecast

Eleven analysts forecast the average price in 12 months at $7.46 with a high forecast of $8.00 and a low forecast of $4.90. The average price target represents a 10.03% increase from the last price of $6.78. From those 11 equity analysts, three rated “Buy”, seven rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $8 with a high of $12 under a bull scenario and $4 under the worst-case scenario. Evercore ISI raised the price target to $8 from $5; Citigroup upped their stock price objective to $7.5 from $5.5 and Ford Motor had its target price raised by Credit Suisse Group to $8 from $7. The brokerage currently has a neutral rating on the auto manufacturer’s stock.

A number of other equities research analysts have also recently issued reports on the stock. Barclays upped their price objective to $7 from $4 and gave the company an equal weight rating. Royal Bank of Canada dropped their price target to $5 from $6.50 and set a sector to perform rating.

It is good to hold now as 50-day Moving Average and 100-200-day MACD Oscillator signals a selling opportunity.

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Analyst views

“We raise our 2020 Ford EPS forecast to ($0.90) vs. our prior forecast of ($1.30), while for 2021 and 2022 our EPS rises to positive $0.75 and $1.25 vs. our prior forecast of $0.30 and $0.80 respectively. On our revised price target of $8, Ford trades at just over 10x our 2021E EPS. Currently, the stock trades at just over 9x our revised 2021 EPS forecast,” Adam Jonas, equity analyst at Morgan Stanley noted in June.

“We raise our 3Q N. American Ford volume forecast to negative 12% Y/Y vs. down 15% previously. Our 4Q volume is revised to down 3% vs. down 5% previously. This slight upward adjustment reflects stronger than expected US SAAR, a rebound in used vehicle prices, and more supportive auto credit vs. our prior forecasts,” he added.

Upside and Downside Risks

Upside: 1) More detail around restructuring actions. 2) Positive share gains in pickups, Ford’s strongest segment. 3) Decomplexification actions. 4) Launch execution. 5) Further announcements around EVs or AVs- highlighted by Morgan Stanley.

Downside: 1) US SAAR resiliency (2020 base case 14.0MM). 2) Further COVID-19 impacts. 3) The F-150 pickup truck loses market share. 4) Slowdown in key oil-dependent end markets. 5) Launch / Warranty issues continue to remain a problem.

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