Why This Ford Analyst Is Downgrading Blue Oval Stock

Ford Motor Company F shares have been on a tear and the company's stock recently hit the $100-billion market capitalization mark.

The Ford Analyst: RBC Capital Markets analyst Joseph Spak downgraded Ford from Outperform to Market Perform and increased the price target from $21 to $26.

The Ford Thesis: Ford's turnaround is well underway and the automaker can effectively transition toward a EV/AV/software world, Spak said in a Friday downgrade note.

Ford got the Mach-E to market quickly, it has seen strong demand and Dearborn is now tripling capacity for the product, the analyst said. The company is likely to get its F-150 Lightning to market ahead of competitions, which alone is a solid feat, he said. 

The heavy reliance on the existing F-150 platform versus competitors that took a group-up approach, however, is a fair pushback, Spak said. It now appears that the company may not have a technical disadvantage and got to market quicker, the analyst said.

Overall, Ford is now targeting 600,000 BEV capacity in 2023, he said.

"We still aren't sure they can produce to that level in 2023 given ramps, but it's significantly more than expected a few years ago," Spak said. 

Related Link: Ford Can't Compete With Tesla Despite Doubling F-150 Lightning Production: Analyst

The company has also made major investments in BEV and battery capacity on top of improving fundamentals from restructuring, positive earnings revisions and "unlocking" value from under corporate Ford through the investment in Rivian Automotive, Inc. RIVN and potentially from its stake in Argo, the analyst said. 

Ford has re-rated and there could be some further potential for the company to re-rate, as it continues to prove its transition, he said. 

That could take time, Spak said.

"Bottom-line, is we believe Ford stock price may consolidate for a while, so investors may choose to allocate capital to other auto names in the interim."

With the near-term upside looking a little more challenging, RBC said it is  moving to the sidelines.

F Price Action: At last check, Ford shares were down 1.12% at $24.74. 

Photo courtesy of Ford.