BofA Raises Price Targets For Ford, Ferrari & Toyota

Electric vehicle stocks have been hit performers in the past couple of months, but one firm raised price targets for three legacy automaker stocks on Monday.

The Analysts: Bank of America analyst John Murphy reiterated a Buy rating for Ford Motor Company F and raised his price target from $20 to $22. He also reiterated a Buy rating for Ferrari NV RACE and raised his price target from $275 to $300.

Bank of America analyst Kei Nihonyanagi also reiterated his Buy rating for Toyota Motor Corp TM and raised his price target from $210.70 to $218.

Related Link: Lordstown Motors Drops 16% Following Q3 Earnings, But Analyst Says Dip Buyers Beware

The Thesis: In his broad automotive industry note, Murphy said the third quarter was another uniquely challenging quarter for the auto supply chain. Murphy said investors largely overlooked noisy fourth-quarter guidance and instead focused on 2022.

For now, Murphy said the auto industry likely has very few catalysts coming until the fourth-quarter earnings season in January.

“In our view, the bridge into 2022 is setting up less positively than the industry anticipated just a few months ago, with not only lower volume growth, but also emerging/intensifying headwinds like elevated costs (commodities, freight, inflation, etc.) and flattish/fading price/mix even as volumes return,” Murphy said.

The price target hikes come after Murphy updated his valuation models following third-quarter earnings reports.

In a new note on Toyota, Nihonyanagi said the stock is undervalued and should remain an excellent defensive play in an uncertain environment.

“The P/E stands at a mere 7.6x based on our FY3/23 forecasts, and we continue to regard Toyota as a core holding,” Nihonyanagi said.

Benzinga’s Take: There is a huge debate among auto industry investors about the new generation of EV startups starting from scratch and trading at massive valuation premiums versus the legacy automaker stocks generating huge profits, trading at single-digit earnings multiples and investing aggressively in electrifying their business in coming years.

The next two years will be critical in determining whether or not EV startups have the time, technology and resources to dethrone the global auto industry leaders.