Yesterday, investment research firm Morgan Stanley’s analyst Adam Jonas gave a double upgrade to the stock of automobile manufacturer, Ford Motor Company (NYSE: F). As detailed below, Jonas has provided multiple reasons for the stock upgrade. Therefore, we are expecting the stock to appreciate in the short-term.
According to Morgan Stanley, in the near-term, Ford Motor could benefit from the rising construction and infrastructure spending initiatives of President Donald Trump. In the long-term, the automobile manufacturer could put up a solid performance due to its turnaround efforts. The report also points to a possible improvement in performance due to cost-savings initiatives. Jonas has also opined that an exit from certain markets will turn out to be positive for Ford.
Morgan Stanley also revealed that Ford is now the investment research firm’s highest-ranked OEM stock (US). According to Jonas’ estimate, Ford’s F-series truck business is worth about $16 per share, which is more than the enterprise value of the company. This indicates how undervalued the company is, according to Adam Jonas’ estimates.
Furthermore, according to the study, approximately 30% of demand for the Ford F-150 truck is from nonresidential construction. For every 5% increase in the company’s US truck unit sales, Ford’s profits could appreciate by 10%. Jonas also believes that investors have underestimated the possible increase in demand for pickup trucks due to the recent rally in the oil prices. Notably, Texas is the world’s largest pickup truck market.
Jonas said “We also believe there is potential for any US infrastructure spending to be an incremental positive for Ford […]. Ford has some attributes that make it arguably a cheap machinery stock with leverage to any infrastructure spending.”
Therefore, based on the arguments provided above, for the first time in four years, Morgan Stanley has upgraded the stock of Ford to ‘overweight’, from ‘underweight.’ The target price was also raised from $10 to $15, with a $25 bull case.
The historical price chart indicates that the stock of Ford has strong support at 10.50. Furthermore, the stochastic oscillator is rising out of the bearish zone. Therefore, we expect the stock to move up further.
With minimum investment, we wish to benefit from the stock’s uptrend. Therefore, we may invest in a call option contract offered by a binary broker. While investing in a call option, we would choose a date around March 23 for the expiry of the contract. Further, we would consider investing only if the stock of Ford trades at about $11.0 in the NYSE.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
