Morgan Stanley Turns Bullish On Ford, Says F-150 Franchise Could Be More Valuable Than The Entire Company

Ford Motor Company F's stock is down nearly 15 percent over the past year and is trading at a valuation where its F-150 truck franchise alone is worth more than the company's enterprise value, according to Morgan Stanley

The Analyst

Morgan Stanley's Adam Jonas gave Ford's stock a double upgrade from Underweight to Overweight with a price target raised from $10 to $15 (with a $25 bull case).

The Thesis

Ford's stock closed Tuesday at $10.78 per share, which values the automaker at $42.83 billion. The company's F-series truck franchise alone is worth $16 per share (based on 25 percent EBITDA margins at 6 times EBITDA) or roughly 130 percent of Ford's entire market cap, Jonas said in a note. When adding in the value of other truck franchises like Transit, Ranger and E Series, the value of Ford's entire truck business is worth nearly $20 per share or 160 percent of its market cap.

There are several other "blind spots in the investment debate" that supports a bullish stance, Jonas said. These include ongoing U.S. SAAR strength in which a 5 percent change is worth 16 percent to Ford's earnings, savings from management's restructuring plans and initiatives represents a "cheap call option," and benefits from the U.S. infrastructure bill.

Bottom line, Ford is an "out-of-favor self-help story with room to surprise the market" and a bearish stance on the stock that has been in place since 2014 no longer applies, Jonas said.

Price Action

Shares of Ford were trading higher by more than 3.5 percent at $11.17 early Wednesday morning.

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