Ford (NYSE 🙂 finally gets Wall Street's support for its turnaround plan after many years of missteps and failures. What's different this time around is the company's clear messages about its ambitions in the electric vehicle market, created by new CEO Jim Farley.
Ford executives told investors on Wednesday that they expect 40% of Ford's global sales to be fully electric by 2030. That shift will help grow sales by two-thirds to $ 45 billion, aided by increased sales of vehicles and services to commercial businesses. customers.
To meet that goal, Ford will increase spending on electric car development to $ 30 billion by 2025, about a third more than forecast earlier this year. The increase in spending will accelerate the Detroit-based automaker's shift to eventually make its own batteries, including at two US battery cell factories, along with SK Innovation Co. from Korea
The strategy brings together three key priorities that Farley has emphasized since its acquisition in October: electric vehicles, digital services and leveraging Ford's power with commercial customers such as contractors, utilities and government fleets.
Investors appreciate the new direction Ford is taking, which has pushed the company's stock up 20% over the past five days. Ford stock, which closed at $ 14.88 on Thursday, is up 70% this year, a period when Tesla (NASDAQ 🙂 stock plummeted 11%.
A tumultuous year
This momentum in Ford's stock comes after a tumultuous year triggered by the COVID-19 pandemic that forced the automaker to cut its dividend. The company also lost its investment-grade credit last year, saying goodbye to boss Jim Hackett. The shortage of chips across the industry has threatened 50% of planned production this quarter.
But Ford's EV ambitions have turned investors' focus to the future. That plan includes an electric version of the Explorer, his best-selling sport utility vehicle, the Lincoln Aviator, and a host of other vehicles he didn't know by name. The listing included the description "rugged SUV," suggesting that the revived Bronco might have a battery in the future.
"This is our greatest opportunity for growth and value creation since Henry Ford began scaling the Model T, and we are grasping it with both hands," Farley told analysts and investors in his presentation at the Investor Day. company on Wednesday.
RBC analyst Joseph Spak improved stocks to outperform sector performance, saying the new plan could draw investors off the sidelines. RBC raised its target price for the stock by $ 4 a share to $ 17.
According to his note:
“The bottom line is that we feel much better about the more cohesive strategy as Ford focuses on their strengths. Ford still has to run, but the upside is clearer to us. "
“We believe Ford has a credible plan to increase profitability by 2025+ through Ford Pro and Ford's ability to provide connected services. This should increase the upward profitability (even if we balanced it by execution risk and any likely margin impact of additional BEV products). "
In addition to analyst upgrades, Ford took a PR victory last week when US President Joseph Biden got behind the wheel of the new F150 Lightning electric pickup on his trip to the company's Michigan plant. The Lightning's lower-than-expected starting price of around $ 40,000 makes it quite attractive when several electric truck startups are expected to hit the market. The model has already received 70,000 customer reservations.
Bottom Line
Ford's new CEO is on a well-thought-out plan to make America's second-largest automaker relevant to the future as electric vehicles take over our roads. Ford, despite its late starts and several missteps, is a long-term bet on the EV market, which can be very busy for the next 10 years. That said, its stocks are quite cheap and could suit long-term investors who want a traditional car name in their portfolios.
