Ford Analyst Raises Price Target By 10%: Why He Is Bullish

Ford Motor Co F seeing strong demand for gas-powered vehicles and its aggressive efforts to switch to electric vehicles will drive near-term and long-term price gains, respectively, for the stock, according to Tigress Financial Partner. 

The Ford Analyst: Tigress Financial analyst Ivan Feinseth has maintained a ‘buy’ rating on the Ford stock and raised the 12-month target price by 10% to $22.

The Ford Thesis: Feinseth said demand for Ford’s F-series trucks, SUV models and the relaunched Bronco series is on a strong footing even as it ramps up production of its EV models, including Mustang Mach-E, E-Transit, and F-150 Lightning

“The production launch on April 26th of the F-150 Lightning brings Ford into the EV pickup market ahead of several other competitors, and it is already sold out of its 2022 production run,” Feinseth wrote in a note.

Lightning would rival Tesla Inc’s TSLA yet-to-be-launched Cybertruck, and General Motors Co’s GM Chevrolet Silverado EV. Rivian Automotive Inc RIVN has begun making R1T but has been struggling to meet initial production and delivery targets.

“The recent pullback in price also creates a compelling entry point and value as it begins its ongoing ramp-up of EV production following the recently announced production transformation, forming two distinct manufacturing business units highlighting EV production success and unlocking value.”

See Also: Bill Ford Says F-150 Lightning 'Most Important' Launch Of His Career

Value Creation: Feinseth said the legacy automaker’s “strong balance sheet and cash flow” will fund its strategic initiatives and long-term growth strategy.

“Ford’s ongoing rollout of new products along with international expansion and consistent long-term history of returning cash to shareholders will drive greater long-term shareholder value creation.”

Ford expects 2022 free cash flow to be between $5.5 billion to $6.5 billion. 

Dearborn, Michigan-based Ford split its electric vehicle and the internal combustion businesses earlier this year as it looks to boost profit margins and improve operational efficiency.

Ford has named its electric vehicle unit Model e, while the gas-powered variant is named Ford Blue. The legacy automaker has also created Ford Pro, a unit that focuses on selling commercial vans and trucks.

The automaker has recently announced plans to invest $50 billion over the next four years to develop and expand its EV production as it ramps up to produce over two million electric vehicles a year by the end of 2026 with a goal of 40% of global vehicle production being fully electric by 2030. 

Price Action: Ford stock traded 0.6% higher in the premarket session on Monday.