- Analysts believe the shares could rally 25% to 30%
- Investment bank lists four reasons why Ford could flourish
- Average annual returns have been improving in recent years
US car maker Ford (F:NYSE) has 25% to 30% share price upside, according to analysts at Citi. The investment bank has upgraded its target price for the stock from $12.80 to $16 after pulling together its latest Vehicle Density 2023 survey.
Vehicle density, in Citi’s analysis, is the number of vehicles per household, and it remains one of the investment bank’s most closely watching metrics when it comes to forecasting new car sales.
‘Understanding the direction of vehicle density is perhaps the single most important (and often overlooked) factor of automotive investing,’ Citi says.
Citi’s latest report pointed to ‘a surprisingly strong density outlook, suggesting that recent auto demand resilience reflects a genuine increase in wallet share.’
FOUR REASONS FOR FORD TO FLOURISH
According to the analysis, the upgrade reflects an improved risk/reward proposition due to four factors:
- A more positive outlook on US auto demand
- Ford's recent capital markets day and re-segmentation, which increase the likelihood that Ford Pro will drive improved sentiment and possibly sum-of-parts treatment
- Potential improvements in sentiment towards electric vehicles as Ford’s Mustang Model-e unit executes towards second half margin targets
- Recognition of major opportunities for new cars to integrate software and AI technology
Citi’s new price target for Ford puts it roughly in the middle of the $10 to $22 range for all analyst predictions, according to Koyfin data. The data provider shows 22 analysts currently cover Ford, with eight buys, 10 on hold and four with sell recommendations. Citi is among the buyers.
RECENT EARNINGS STRENGTH
Ford’s recent first quarter results (2 May) knocked expectations for six, reporting EPS (earnings per share) and revenues of $0.63 on $39.09 billion, far beyond respective estimates of $0.42 and $37.42 billion, according to Investing.com data.
Ford will report its second quarter figures on 26 July, with analysts anticipating $0.47 EPS on $42.3 billion revenue.
Ford shares have gained 7.8% so far this year and are 4.7% up over the past month.
Morningstar data shows the stock has handed investors an average yearly total return of 5.1% over the past five years, but that falls to just 1.9% over the last decade.
