Ford Stock Has Run Too Far. Why It’s Like Tesla.

Ford Stock Has Run Too Far. Why It’s Like Tesla.

Text size

Ford stock is down a little following the rating cut from RBC.
Scott Olson/Getty Images

Ford Motor shares were downgraded by an RBC analyst Friday. Weakening Wall Street sentiment actually moves Ford closer to automotive- and electric-vehicle leader Tesla in some interesting ways.

RBC analyst Joseph Spak took his rating to the equivalent of Hold from Buy. His price target, however, went up to $26 a share from $21. Spak praised Ford (ticker: F) in his report for the progress made turning around the company, but with the stock up about 60% in the past three months, he is taking some of his chips off the table. There isn’t enough upside left in the stock for him right now.

“We don’t want to take anything away from the job at Ford. The company has re-rated and there could be some further potential for the company to re-rate as they continue to prove their transition,” wrote Spak. Re-rating refers to getting a higher valuation from investors. Ford is trading at about 12 times estimated 2022 earnings. Historically, the company has traded for closer to 10 times.

The transition Spak is talking about is the shift to electric- and autonomous-vehicles. Progress will take time for Ford, which may mean investors look to other auto stocks in the meantime, Spak notes.

Ford is chasing Tesla (TSLA). Ford CEO Jim Farley even uses the phrase “compete like a challenger” to describe his strategy to investors and analysts. The thing is that the more progress Ford makes, the more Wall Street treats Ford like Tesla.

With Spak’s downgrade, 50% of analysts covering Ford stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. Ford is now below average, like Tesla. 46% of analysts covering Tesla stock rate shares Buy.

Valuation is one of the biggest reasons analysts aren’t recommending Ford stock, similar to Tesla. The average analyst Ford stock price target is about $21 a share, roughly 15% below where shares are trading. The average analyst price target for Tesla stock is about $912 a share, about 10% below where shares are trading. (The average upside implied by analyst price targets for stocks in the S&P 500 is about 10%.)

What’s more, 21% of analysts rate Ford stock Sell. That is unusual, too, like Tesla, where 30% of analysts rate shares sell. Meanwhile, no analysts rate General Motors (GM) stock Sell, and the average Sell-rating ratio for stocks in the S&P 500 is less than 10%.

Finally, analyst controversy at Ford looks like Tesla. The bull-bear spread between top target prices for Ford stock is about $19 a share. That is roughly 75% of the current stock price. The average bull-bear spread for stocks in the S&P is roughly 45%. The bull-bear spread for Tesla stock is about 115% of the current stock price.

It turns out, Farley’s strategy is working operationally, as Spak’s report says. The strategy is also having an effect on analyst sentiment.

Ford stock is down about 1.5% in early trading, following the rating cut. Shares are  down about 0.9%. The S&P 500 is flat. The Dow Jones Industrial Average is off about 0.5%.

Write to Al Root at

Post a Comment