Video Source: CNBC Television
The stock of Ford Motor Co. (NYSE: F) garnered the market’s attention yesterday after Joseph Spak, an analyst at UBS, initiated coverage of the company with a buy rating. The analyst has highlighted the automobile giant’s pro-business steps in its commercial division as the main reason for the buy rating. Specifically, Spak believes that Ford would demonstrate more solid resilience than anticipated and likely negate headwinds related to blue and electric car versions. The stock of Ford ended Thursday’s trading session at $12.62, almost flat from its prior close.
The valuation of the automotive manufacturer has encountered challenges due to postponements in their migration to electric vehicles and worries regarding a possible labor strike led by the UAW (United Auto Workers). Despite these factors, the analyst expresses confidence that Dearborn, Michigan’s earnings will exceed expectations, presenting an opportune and strategic entry point for investors.
Spak is hopeful that Ford’s earnings will be led by bigger margins fueled by their Ford Pro division, which commands a superior market network and a prominent share in the US.
The analyst note reads, “Ford Pro commands a robust position in the US and European markets. As per Ford, almost 25% of fleets in the US carry the Ford brand.”
As per Joseph Spak, Ford’s shares are trading at a dirt-cheap price of 2.5x the company’s enterprise value (2025) to EBITDA. The analyst, as mentioned earlier, is specifically bullish on Ford Pro, a business division owned by the publicly traded firm that is committed to offering its best to commercial clients.
Spak forecasts the division to record adjusted EBIT growth (compounded and annualized) of 5% from 2023 through 2026, compared with analysts’ estimates of -1%. In actual figures, the forecast growth rate translates to roughly $9.30 billion in 2026. The UBS analyst also expects a margin of slightly above 15% in 2026. This could pave the way for a further $0.15 per share in the earnings per share forecast made by UBS. The overwhelmingly positive view stems from the fact that the Ford Pro has a solid positioning in the market and carries impressive growth potential.
In his research note, the analyst acknowledged that CEO Jim Farley deserves appreciation for restructuring the company and highlighting the profitability issues faced during Ford’s shift from internal combustion engines (ICE) to electric vehicles. Furthermore, the re-categorization has provided investors with in-depth knowledge about Ford’s Pro business.
Based on the aforesaid facts, the analyst upwardly revised Ford’s price target to $15 from $11 while issuing a buy rating. Previously, UBS had a sell rating on the stock.
Interestingly, Spak has given a bullish rating for Ford despite a 2.80% y-o-y decline in sales of electric vehicles in the second quarter. Additionally, the bullish view has come against the backdrop of a likely strike by the United Auto Workers in the next few days. Still, the analyst suggests investors look beyond the temporary challenges and consider investing in Ford with a long-term view.
The buy rating from UBS is expected to keep Ford stock slightly bullish in the short term.
The historical price chart indicates that the stock of Ford is rising after consolidating at $12.20. The next resistance is anticipated to be only near $13.60. Additionally, the stock has closed above its 50-day moving average, while the MACD indicator is showing a positive reading. Therefore, we anticipate the stock price of Ford to remain in an uptrend in the short term.
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.
