A New Bull Case For Ford Sees More Than 100% Upside

If things go right for Ford Motor Company F, things could go really, really right. By Morgan Stanley’s estimates, the stock could pop from $12 to $25 — a rate unseen since 2001.

To be sure, Morgan Stanley isn’t confident that things will go right and, mindful of the downside, maintains an Underweight rating on the stock.

But the firm’s paying attention.

“We are keeping an open mind and looking for an opportunity for better entry point, potentially following some necessary steps in the sequence of events leading up to an eventual turnaround effort,” analyst Adam Jonaswrote in a Tuesday note.

How Things Could Be

Ford has not fully articulated its restructuring plan, but Jonas is watching for the automaker to:

1. Exit Europe and its limited international operations.
2. Sell its Chinese joint ventures.
3. Cut loss-incurring units.
4. Diminish small and midsize car programs or non-U.S. Finco assets.
5. Commit electric Lincolns to the Chariot ride-hailing service.
6. Fund pension liabilities.
7. Partner with or acquire software players.
8. Produce all cars with Level 1 or 2 autonomous capabilities.
9. Or, store all data in Ford Smart Mobility in preparation for partner use.

Regardless of its route, the firm appears ready for motion.

“We see Ford’s 3Q as a prelude to further strategic changes, potential capital raising, restructuring, and business realignment,” Jonas wrote. “The headwinds facing Dearborn are significant, and we see scope for an equally significant response.”

How Things Are On Track To Be

Based on third-quarter results, Morgan Stanley raised its price target from $9 to $10 and its EPS estimates for 2017, 2018 and 2019 from $1.54 to $1.82, from 94 cents to $1 and from 75 cents to 92 cents, respectively.

“Ford is going through a transitionary period where we see scope for near-term fundamentals to bring consensus forecasts down materially,” Jonas wrote, noting risk in macroeconomic factors.

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