While Ford (NYSE:F) stock is up just 1% today, the legacy automaker made an exciting announcement this afternoon. Ford shared that it would be committing $10 billion to $20 billion over the next five to 10 years to convert its existing factories to produce electric vehicles (EVs). Ford is reportedly using Tesla’s (NASDAQ:TSLA) success as a road map for its own EV ventures.
The multibillion-dollar investment is part of CEO Jim Farley’s plan to challenge Tesla as the top EV maker. The new investment would add on to the $30 billion that Ford has committed to EVs through 2025. For what it’s worth, investors in TSLA stock should be flattered that Ford is trying to follow in its footsteps. Ford’s electrification plan will also set aside capital to hire engineers skilled in “battery chemistry, artificial intelligence and EV software,” according to unidentified sources familiar with the plan.
Adding on to that, an unidentified source stated that Ford is evaluating spinning off a small portion of its EV business. The spinoff would involve lower-volume models, so that Ford could focus its efforts on mass-market models. When asked, Ford declined to comment on a potential spinoff and business reorganization.
The path for Ford seems bright as it invests billions to keep up with electrification. The $10 billion to $20 billion plan is great news for investors in F stock, since it shows that Ford is willing to sacrifice capital in the short term to generate revenue in the long term. With that in mind, let’s take a look at how Wall Street feels about Ford.
F Stock Price Predictions
- RBC Capital has a price target of $26. Analyst Joseph Spak sees limited near-term upside since F stock has ran up so much recently. However, Spak believes that Ford’s turnaround is well underway. The analyst added that “we believe they can continue to transition towards a EV/AV/software world.”
- Jefferies has a price target of $25. Analyst Philippe Houchois recently downgraded Ford from “buy” to “hold,” although he raised the price target from $20 to $25. Houchois explained that it’s too early to “re-rate legacy OEMs for their EV progress since earnings remain mostly driven by cyclical shortages, returns remain within historical norms and the EV transition is largely a zero-sum-game initially.” However, the analyst remains upbeat on Ford’s fundamentals and believes Ford can grow its earnings in the U.S. and internationally this year. Houchois added that he sees Tesla being a continued industry threat for Ford.
- Wells Fargo has a price target of $25. Analyst Colin Langan believes that Ford will see 9% global growth this year, which is less than Ford’s 10% growth estimate. For earnings per share (EPS), Langan expects Ford to report $2.30, which is higher than the $1.98 consensus. In addition, the analyst added that he sees General Motors (NYSE:GM) as a better investment than Ford due to “restructuring benefits.” Overall, Langan has an “optimistic view of the multiyear auto recovery.”
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
