Why Is This Ford Analyst Downgrading The Stock?

Ford Motor Co. F recently wowed the Street with its execution and accelerated transition to electric vehicles. An analyst at Nomura, however, has turned cautious on the legacy automaker.

The Ford Analyst: Anindya Das downgraded Ford from Neutral to Reduce, with a price target of $13.

The Ford Thesis: Ford's shares have gained about 104% year-to-date, outperforming peers such as General Motors Corporation GM, Stellantis N.V. STLA and Toyota Motor Corporation TM, Das said in a note.

The analyst attributed the market's optimism to the company's success in offsetting volume and market share losses by strong net pricing and reining in quality issues.

Additionally, Ford management's progress with turning around Ford's international operations, especially Europe and South America, and clearer communication of its electrification strategy helped improve investor sentiment, he added.

Related Link: Why Ford Is Shutting Down Vehicle Production In India

With Ford issuing a weak sales outlook for 2022 due to the chip supply issues, it's difficult to justify the current premium valuation over peers, Das said. The company's 2021 sales will likely be 17% lower than in 2018.

Ford's Asian peers, however, have begun indicating significant production normalization in November and thereafter, the analyst noted.

"Against this backdrop, we think Ford's tepid production outlook for 2022 is setting it up for further market share losses, especially in North America (NA), which could become permanent if such supply chain issues linger while peers recover," Das wrote in the note.

F Price Action: At press time, Ford shares were up 0.17% at $17.98.