In the midst of an already difficult week, Ford (NYSE:F) has received more bad news in the form of an analyst downgrade. F stock had already been declining this week after the company reported disappointing sales figures for the quarter. Now an analyst downgrade has pushed shares even further into the red. This lack of faith from Wall Street calls into question the future not just of Ford but of the entire automotive sector.
Let’s take a closer look at the factors concerning industry experts.
What’s Happening With F Stock
Today brought reports that Brian Johnson of Barclays has issued a bearish take on F stock. The analyst downgraded his rating from a “buy” to a “hold.” Additionally, he lowered his price target from $23 to $17 and downgraded F to equal weight from overweight.
As a result, F stock has spent most of the day in the red. As of this writing, it is down almost 3.5% for the day. Despite a slight rally this afternoon, there’s nothing to suggest that Ford will suddenly reverse direction and push into the green.
Why It Matters
Since 2022 began, Ford has been steadily losing momentum and disappointing investors. Earlier this week, it reported that sales figures had declined 17% over the past three months. The company cited the chip shortage as the primary reason. It is understandable that the supply chain crisis would pose constraints to automakers. However, while Ford reported declining sales, Tesla (NASDAQ:TSLA) reported the opposite. For investors, it is difficult to ignore the fact that even offering lower-cost electric vehicles (EVs) couldn’t help Ford compete with Tesla.
While Johnson also lowered his price target for Ford rival General Motors (NYSE:GM), he maintains a “hold” rating. He isn’t the only expert who sees Ford as a worse auto play. The TipRanks analyst rating consensus rates GM as a “strong buy” while only rating F as a “moderate buy.” Additionally, 13 analysts maintain buy ratings for GM, while only six rate F the same.
The chip shortage has given investors cause to regard the general automotive sector through a fairly bearish lens. That said, it shouldn’t be forgotten that some plays are clearly worse than others. While Tesla proved it can withstand difficult industry forces and keep pace with demand, Ford did not. Now Wall Street is souring on the company, and investors will likely jump ship before F stock falls too far.
What It Means
It’s impossible to ignore the sad underlying truth of this story. Ford is one of the most respected, recognizable names not just in the auto sector but in American industry. Even that hasn’t been enough to help it recover from the negative headwinds generated by forces beyond its control.
It will take a lot for Ford to restore the investor confidence that it hast lost in recent months. Wall Street will be cautious when evaluating automotive plays. More than that, it will look to companies with a demonstrated ability to innovate and adapt. No matter how we examine it, Ford just doesn’t fall into that category. It needs a new catalyst, and there doesn’t appear to be one on the horizon.
On the date of publication, Samuel O’Brient 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.
