Ford Motor (F) announced Wednesday that it is shifting its electric vehicle (EV) strategy to deliver profitable and capital-efficient growth, including offering a wider range of electrification options at lower prices and increasing ranges. Wall Street is embracing the news, sending Ford's stock higher in intraday trading.
Ford's plan includes delaying the production of its all-electric pickup truck to the second half of 2027. It was initially expected to begin production next year.
The company is also canceling plans for its three-row sports utility vehicle (SUV), and instead prioritizing hybrid models and electric commercial vehicles, according to CNBC. Ford will incur a special non-cash charge of about $400 million due to the adjusted plans, which may also result in additional expenses and cash expenditures of up to $1.5 billion.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The automaker also said it would realign its U.S. battery sourcing to reduce costs and boost capacity for current and future production. "An affordable electric vehicle starts with an affordable battery," said Ford CEO Jim Farley in a statement. "If you are not competitive on battery cost, you are not competitive."
"We're committed to creating long-term value by building a competitive and profitable business," said Ford Chief Financial Officer John Lawler. "With pricing and margin compression, we've made the decision to adjust our product and technology roadmap and industrial footprint to meet our goal of reaching positive EBIT [earnings before interest and taxes] within the first 12 months of launch for all new models."
Is Ford stock a buy, sell or hold?
Ford Motor has underperformed on the price charts in 2024, down more than 4% on a total return basis (price change plus dividends) vs a 30% return for the S&P 500. This has Wall Street sitting on the sidelines when it comes to the consumer discretionary stock.
True, the average price target among the 26 analysts following F stock tracked by S&P Global Market Intelligence is $13.43, representing implied upside of about 24% to current levels. However, the consensus recommendation is a Hold.
"We believe the market still lacks faith in Ford's EV and software strategy, which compounds the higher cash balance and lack of higher cash returns issue as investors are concerned about the return they will see on that cash," says UBS Global Research analyst Joseph Spak (Neutral, the equivalent of Hold). While the analyst believes electrification is where the market is headed over the intermediate term, investors are currently seeking profits from internal combustion engine (ICE) vehicles.
However, there are some bulls in Ford's corner. Financial services firm BofA Securities, for instance, has a Buy rating and $20 price target on Ford stock.
BofA analyst John Murphy recently went on the road with Ford's CEO and chief financial officer. "The conversation focused on Ford's efforts to reduce warranty costs, opportunities to grow earnings in Ford Pro, and the company's progress in cutting EV costs," Murphy said, with the executives reiterating that the company plans to make "no changes to its capital allocation strategy" and "pay out 40% to 50% of free cash flow as dividends and deploy capital to grow the business."
Related Content
-
Verizon’s Free iPhone Deal: What to Know Before You Switch or UpgradeVerizon is offering a free smartphone — including the latest iPhones — with any myPlan, plus a three-year price lock. But is it really the best deal for you?
-
Married? Five Ways to Ensure Your Estate Plans Work in TandemGetting on the same page now means fewer potential problems when it counts.
-
Before You Invest Like a Politician, Consider This DilemmaAs apps that track congressional stock trading become more popular, investors need to take into consideration some caveats.
-
How to Put Together Your Personal Net Worth StatementNow that tax season is over for most of us, it's the perfect time to organize your assets and liabilities to assess your financial wellness.
-
Stock Market Today: Trump Retreats, Markets RejoiceStocks rally, yields soften, the dollar rises, and even beaten-down names enjoy the wages of potential trade peace.
-
Tesla Stock Pops as Elon Musk Promises DOGE Draw BackTesla reported a sharp drop in first-quarter earnings and sales, as the EV maker suffered a backlash to its CEO's political ambitions.
-
Bouncing Back: New Tunes for Millennials Trying to Make ItAdele's mournful melodies kick off this generation's financial playlist, but with the right plan, Millennials can finish strong.
-
Early-Stage Startup Deals: How Do Convertible Notes Work?Some angel investors support early startups by providing a loan in exchange for a convertible note, which includes annual interest and a maturity date.
-
Stock Market Today: Stocks Soar on China Trade Talk HopesTreasury Secretary Bessent said current U.S.-China trade relations are unsustainable and signaled hopes for negotiations.
-
How Can Investors Profit From AI's Energy Use?Global energy demand is expected to grow by leaps and bounds over the next several years as AI usage accelerates. Here's how to get a piece of the pie.
