Morgan Stanley Raises Ford (F) Bull Case Target to $25 But Maintains 'Underweight'
Morgan Stanley raised its price target on Ford (NYSE: F) to $10.00 (from $9.00) while maintaining an Underweight rating. Meanwhile, the bull case was raised from $18 to $25.
Analyst Adam Jonas notes Ford is going through a transitionary period. The anticipate increased transparency on the turnaround plan for Ford later in 2018. That said, the "unpredictability of the numerous macroeconomic factors outside of the company's control (including the used car and auto cycle) elevates the execution rise."
On the $25 bull case, Jonas introduces a Sum-of-the-Parts Model:
- We value the F-Series franchise at $16/share(est.25% EBITDA margin at 6x EBITDA) or roughly130% of Ford’s entire market cap.
- We value theFord Europe, S. America and Asia Pacific (excluding China JVs, trucks and SUVs) at slightly less than zero.
- Ford Future (Argo AI, other autonomous tech, Chariot, EV assets/IP and Lincoln ex-China)valued at $3bn or $0.74 per Ford share
- We solve for over 900k units of N. American volume that may be responsible for as much as $5k or $6k per unit loss on our2018 forecasts.
The analyst also identifies a series of actions that Ford could consider as it undertakes a wholesale strategic realignment:
1. Exit all subscale international markets including S. America
2. Exit Europe
3. Sell China JV stakes to the domestic partners
4. Eliminate up to 1 million units of NA capacity
5. Cut 10 to 20 nameplates (20 to 40% of total).
6. Exit substantial portions of small and midsize car program globally.
7. Double down on Lincoln as the shared mobility/"Uber brand" with a dedicated EV infrastructure
8. Fund pension liabilities
9. Divest or liquidate all non-US Finco assets.
10. Further acquisitions to bring in outside software expertise
11. Make100% of cars with Level 1 or Level2 ADAS and connectivity standard as soon as possible.
12. House all data in Ford Smart Mobility (FSM) LLC for transparency and liquidityTue,
31 Oct 2017 08:28:00 -0400
Copyright (c) 2017
StreetInsider.com
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