Shares of Ford Motor faced a reluctant downgrade on Monday as Jefferies analyst Philippe Houchois downgraded the stock to Hold from Buy. Ford’s price target also saw a decrease from $17 to $15 per share.
In response to this announcement, Ford shares dropped by 1.2% in early trading while S&P 500 and Dow Jones Industrial Average futures experienced a slight increase of about 0.1%.
This recent downgrade adds to the company’s recent losses. Following the second-quarter results, Ford stock witnessed a 5% drop. Although the earnings exceeded expectations, the company decided to extend some of its EV goals into the future. Ford now plans to produce EVs at a rate of approximately 50,000 units per month by the end of 2024 instead of the previously anticipated end of 2023.
While this decision is reasonable in terms of minimizing losses within Ford’s EV division, known as Model e, it was considered a setback shortly after Ford’s Investor Day on May 22. Houchois expressed his disappointment in the report, stating, “With a heavy heart, we cut Ford to Hold.”
In contrast to Ford, Houchois mentions that Chrysler parent Stellantis (STLA) appears to be the better bet among the Detroit-three auto makers. General Motors (GM), Ford, and Chrysler originally formed the D-3 group. However, with brands like Jeep and Ram now becoming part of the European auto giant, Stellantis is poised to emerge as a stronger contender in the industry.
Overall, this downgrade highlights Ford’s need to navigate its future EV production effectively if it aims to maintain its competitive edge in the market.
Stellantis Shares: Attractive Valuation and Positive Performance Reported
Stellantis, the multinational automotive company, recently announced impressive financial results that exceeded market expectations on July 26. This positive outcome has led to a rise of approximately 11% in the company’s shares. However, despite this growth, Stellantis shares continue to be undervalued when compared to its competitors in the industry.
At present, Stellantis shares trade at less than 4 times the estimated earnings per share for 2024. In contrast, Ford stock trades at approximately 7 times earnings, while GM shares trade at less than 6 times earnings. These low valuation multiples make Stellantis shares particularly attractive to investors.
Renowned analyst Houchois rates Stellantis shares as a “Buy” with a $25.30 price target for the stock. In comparison, he rates GM stock as a “Hold” and has set a $39 price target for that stock.
In terms of analyst recommendations, approximately 82% of analysts covering Stellantis shares rate them as a “Buy.” This is significantly higher than the average “Buy” rating ratio for stocks in the S&P 500, which stands at about 55%. Similarly, 56% of analysts rate GM stock as a “Buy,” and the Buy-rating ratio for Ford stock is around 35%.
Looking at the future price targets set by analysts, the average target price for GM stock stands at about $49 per share. This represents an almost 30% increase from its recent trading levels around $38. For Stellantis shares, the average target price is approximately $25, reflecting a 25% increase from its recent trading levels around $20. As for Ford shares, the average target price is about $14.60. The shares most recently closed at $13.26.
These positive factors combined with Stellantis’ strong performance post-results underscore the appeal and potential for investors seeking opportunities in the automotive sector.
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