Ford Motor (F) stock is moving lower Monday after financial services firm Jefferies downgraded the automaker to Underperform (equivalent to a Sell) from Hold and lowered its price target to $9 from $12.
Ford stock has disappointed investors so far in 2024 with a decline of more than 16% for the year to date. And Jefferies analyst Philippe Houchois sees further downside from here, citing an inventory overhang, an upcoming decision on its European presence and concerns over high warranty costs.
De-stocking has become an issue for Ford, Houchois says. While "the drift in inventory in recent months could help achieve the guided $8 billion in free cash flow guidance," it "also creates an overhang into 2025," he adds.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Regarding the company's "looming strategic decisions" on its European presence, Houchois questions Ford's ability to keep its operations going in the overseas market "given loss of scale in private vehicles," though exiting Europe "could hurt Pro's earnings."
Lastly, the analyst has "observed the gap between provisions made on repeated quality and warranty issues and the corresponding cash outflows" of approximately $8.5 billion since 2020, which equates to about $2 per share. Without a "dramatic improvement in quality," Houchois says these warranties will continue to be an overhang on Ford's net cash and balance sheet.
Ford stock is a Hold for most of Wall Street
The majority of Wall Street remains on the sidelines when it comes to the consumer discretionary stock. According to S&P Global Market Intelligence, the average analyst target price for F stock is $11.91, representing implied upside of about 19% to current levels. Meanwhile, the consensus recommendation is Hold.
Financial services firm Bernstein is one of those with a Market Perform rating (equivalent to a Hold) on the large-cap stock, along with an $11 price target.
"We like Ford's business for the high market share in U.S. trucks and improving battery electric vehicle (BEV) story," wrote Bernstein analyst Daniel Röska in a November 7 note. "But the upcoming quarters will likely see significant pricing headwinds in the U.S. market that neither Ford, nor its competitors will be able to escape."
Argus rates F a Buy
Not everyone is skeptical of Ford, though. Financial services firm Argus Research, for one, is bullish on the stock with a Buy rating and $13 price target.
"With the recently approved new labor agreement with the United Auto Workers in place and the restructured foreign operations now complete, (and showing a profit), we believe that the company's new heightened attention on reduction of costs, both structural and warranty, and its recently lowered capital expenditure program, will pave the way towards increased profitability in the next few years," said Argus Research analyst Bill Selesky in an October 29 note. "We believe that Ford shares offer value and remain attractively valued based on the company's global scale, brand reputation, and broad vehicle lineup, which continues to generate strong interest among consumers."
Related Content
-
Are You Leaving Money on the Table? Four Strategies to Free Up Stuck InvestmentsFrom forgotten 401(k)s to outdated asset allocations, here’s how stuck money can hurt your retirement.
-
COVID Aged Your Brain Faster, Even if You Didn't Get SickWhether you contracted COVID or not, your brain took a hit. Here's what that means for your health and what you can do about it.
-
Are You Leaving Money on the Table? Four Strategies to Free Up Stuck Investments
From forgotten 401(k)s to outdated asset allocations, here’s how stuck money can hurt your retirement.
-
A Taxable Brokerage Account May Be What Your Retirement Is MissingYou can supplement your retirement nest egg or save for other goals with a taxable brokerage account.
-
What Tariffs Mean for Your Sector ExposureNew, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
Five Things to Do if You're Forced Into Early Retirement (and How to Reset and Recover)Developing a solid retirement plan — before a layoff — can help you to adapt to unexpected changes in your timeline. Once the initial panic eases, you can confidently reimagine what's next.
-
Five Ways to Adapt Your Charitable Giving Strategy in a Changing World: An Expert GuideEconomic uncertainty, global events and increasing wealth are shaping the charitable landscape this year. Here are the philanthropic trends and some tips that could help affluent donors optimize their impact.
-
Stocks Rally on Apple Strength: Stock Market TodayThe iPhone maker will boost its U.S. investment by $100 billion, which sent the Dow Jones stock soaring.
-
What to Know About Multisector ETFsMultisector bond funds allow investors to pick and choose among a wide array of assets.
-
I'm an Estate Planning Attorney: These Are the Two Legal Documents Everyone Should HaveEvery adult should have a health care proxy and power of attorney — they save loved ones time, money and stress if a sudden illness or injury leaves you incapacitated.
