Morgan Stanley Revisits Auto OEMs, Says Fiat Chrysler Has 'Strategic Potential,' Ford 'Out Of Favor'

Ford Motor Company F is undergoing a major shift from passenger cars, Tesla Inc TSLA’s recovering from even more Model 3 setbacks and Fiat Chrysler Automobiles NV FCAU’s at the center of an emissions scandal.

It’s a busy season for automakers. Here's how one analyst is making sense of the news.

Ford

Morgan Stanley considers Ford the “most out-of-favor OEM in the world” and expects the stock to be rangebound until management undergoes changes or makes significant headway in restructuring.

“We believe that if Ford learns lessons from GM and FCA on what to exit and what to carve out, it can unlock SOTP potential up to $25,” analysts Adam Jonas and Armintas Sinkevicius said in a Thursday note. “We see Ford trading like a cheap machinery stock.”

They maintain an Overweight rating on Ford with a $16 price target.

General Motors

General Motors Company GM has touted itself as a veritable Auto 2.0 play, but Morgan Stanley has a different perspective.

“We see GM as a more interesting play on Auto 1.0, trucks and logistics,” the analysts said. “Auto 2.0 potential is sufficiently in the market, in our opinion.”

Despite heavy exposure to China trade negotiations and crowded positioning due to its truck changeover, the analysts maintain an Overweight rating on GM with a $48 price target.

FCA

Jonas and Sinkevicius see “tantalizing strategic value” in FCA’s Jeep, RAM, Maserati, Marelli and Comau segments.

“We expect FCA to become an extremely popular equity in a diverse range of portfolios (value, special situations,etc.), with scope for the stock to test the 40-euro bull case by year end,” they said. “In our view, a potentially sharp move up could provide a long-awaited opportunity to exit the stock.”

The analysts additionally predict CEO Sergio Marchionne, who has plans for retirement, will remain with the company until the turnaround is complete. They maintain an Overweight rating on the stock with a price target equivalent to $26.96 in U.S. dollars. 

Tesla

Considering the market’s sensitivity toward Tesla, Morgan Stanley is watching for capital raises and updates on Model 3 production.

“We are prepared for near-term squeeze potential as new capital buys more time followed by a renewal of fundamental pressure on both supply and demand,” Jonas and Sinkevicius said.

Tesla needs strategic partnerships to secure long-term success, the analysts said. 

Morgan Stanley maintains an Equal-Weight rating on Tesla with a $291 price target.

Price Action

At the time of publication, Tesla was set to open around $279.07, GM around $37.85, FCA $22 and Ford $11.46.

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