When we speak of Ford Motors (F, Financial), the second-largest global automaker, we unravel a lot of interesting news on the market bellwether, which sounds like information good enough to soothe investors’ nerves. And quite often investors holding any stock are worried about their long-term prospects and the same applies to the Ford stock as well. Recently, a study conducted by Kiplinger shows that the entire U.S. auto industry looks bullish and highlights Ford’s F-150 to be in a special situation to benefit the company enlarge. Kiplinger’s views came in just after the recent Citigroup downgrade and provided a level headed view which sides the viewpoint given by 13 of the 20 analysts who rate Ford as a buy stock for the near future. Also, though Morgan Stanley (MS, Financial) has recently downgraded the Ford stock from “Overweight” to “Underweight” which represents a drastic shift of rating, Ford still holds a lot of promise having strong fundamentals. Let’s take a sneak peek into the recent downgrade by Morgan Stanley and how Ford still remains a promising stock for the shareholders.
The recent downgrade impact
At the beginning of last week, the news got circulated that Ford Motors has been downgraded by Morgan Stanley. According to the Financial Times, the shares were downgraded from “Overweight” with a price target of $17 to “Underweight” with a price target of $16. Indeed, the downgrade was questioned by several analysts who were concerned on the drastic swing from "Buy" to "Sell" for the Ford stock following this downgrade, and a minor target price adjustment of $1.
In light of the recent downgrade and the trading weakness exhibited last week after the downgrade, Ford Motors seems to have extended its current slide and was trading around $16.60 during the last week.
As shares are now at the oversold territory, long-terms investors might be happy to note that they can pick up one of the greatest companies trading in NYSE at a great price. Also while waiting for higher stock returns, the company will also pay a 3% dividend which does sound a fair deal for the long term investors.
Ford maintaining its leadership
While researching the automobile industry, data shows that the Ford F-150 has been the best-selling truck in the U.S. for the past 30 years. And, the new aluminium F-150 will enhance Ford’s leadership as businesses that use trucks in the U.S. are expected to show exponential growth in the upcoming years. This is contradictory to Morgan Stanley findings which have warned specifically that the introduction of Ford’s F-150 truck later this year might hurt the company’s near term profits. Morgan Stanley analysts are of the opinion that there will be a response from competitors such as General Motors (GM) when this new model finally gets launched.
However, one interesting fact to be noted is that now the F-150 truck’s weight would be reduced by about 700 pounds, thus leading to improved gas mileage. This means more mileage for the truck buyer which makes it a key selling point in the U.S. market.
Besides truck sales, Ford is laying emphasis on increasing the quality of the Ford Focus which would continue to move it ahead in that product line. In addition, the Ford Mustang is expected to be exported to 120 countries around the globe having both left and right-hand drives. To increase possibilities for growth, Ford remains focused on launching 4 new models in India over the next 18 to 20 months. Ford wants to make the most in the country having over 1.2 billion inhabitants.
All these facts clearly drive to the conclusion that Ford’s stock is grossly underpriced. Even if we take a cautious stand with auto sales falling 5% in Europe as its economy is not as robust as was hoped for, Ford’s price still looks undervalued.
With the improved quality of the Ford Focus, the export of the Mustang and arrival of the highly anticipated F-150 and expanding markets in the world’s two largest markets –Â China and India –Â Ford emerges as the winner. Hence, from a long-term perspective Ford stock looks worth investing.
The final call
Ford knows how to keep itself strongly positioned in the U.S. and how to grow in emerging countries. It also knows when to reward its investors with increased dividends as was eminent from the recent third-quarter earnings. Hence, Ford does look lucrative on a long-term and investors need not worry much regarding the current downgrades and should stay invested!
