Morgan Stanley Downgrades Ford, Says EV Strategy Is 'Not Fully Clear'

Ford Motor Company F deserves credit for expressing a "sense of urgency" in building out its electric vehicle lineup although management's strategy is "not fully clear" at this point, according to Morgan Stanley.

The Ford Analyst: Adam Jonas downgraded Ford's stock from Overweight to Equal-Weight with an unchanged $9 price target.

The Ford Thesis: Ford has expressed its desire to gain share in hybrids and plug-in hybrid powertrains along with pure battery electric vehicles, Jonas wrote in a note. The company has also said it wants to outsource battery cells as the supply base is mature enough to be cost-competitive.

More recently, Jonas said Ford appears to have shifted its strategy and noted it can manufacture battery components in-house. As such, management needs to settle on a "more salient path of execution" that investors can properly understand.

Related Link: BMW Unveils Tesla Challenger Electric SUV iX

Management's unclear strategy makes it more difficult to model Ford's EV growth profile given the "state of flux" of its EV strategy and smaller amounts of allocated capital versus its rivals.

By contrast, Jonas said General Motors Company GM has a "direct to BEV" strategy but Ford is committed towards a broad lineup of electrification cars that include hybrids.

Investors should remain cautious on the long-term economic value of hybrids and potential headwinds associated with discrepancies of real-world mpg performance for hybrids versus what companies like Ford advertise.

F Price Action: Shares of Ford were trading lower by 3% to $9.15 at publication time.