Ford Upgraded to Overweight By Morgan Stanley on Valuation, Consumer Preference; Price Target Kept at $14
11:28 AM EDT, 10/05/2022 (MT Newswires) -- Ford Motor (F) received an investment rating upgrade Wednesday to overweight from equalweight from Morgan Stanley, which cited the auto maker's stock valuation as well as a preference for Ford over competitor General Motors (GM).
Morgan Stanley kept its price target on Ford's stock at $14 per share. The stock, which has tumbled 40% in the year to date, including a 20% slide in the last month, closed Tuesday's session at $12.36 each.
Ford's shares edged up 1.3% to $12.52 in recent Wednesday pre-market trading amid the upgrade.
The rating upgrade to overweight and price target maintenance on Ford's shares came as Morgan Stanley kept its investment rating on GM at equalweight and cut its price target on GM's shares to $30 each from $42.
"Our preference for Ford vis-a-vis GM is driven by our views of the business portfolio and strategy," Morgan Stanley's analysts said in a Wednesday note to clients.
The upgrade for Ford comes as a "potentially favorable idiosyncratic development regarding the company's restructuring (creation of Ford Blue and Ford Model e) has the potential to better align the growth and [capital-expenditure] needs of the [electric vehicle] business with a more favorable cost of capital," Morgan Stanley's analysts said.
Ford and GM's stocks offer a free cash flow yield of about 10% on the firm's estimates for fiscal 2023, the firm said.
Still, Ford issued a Q3 profit warning last month, and this, "coupled with macro concerns have resulted in a decline in buy-side expectations and sharp pull-back in shares," the bank's analysts said.
At GM, meanwhile, the company hasn't issued a warning, "but we believe Ford's warning is likely to be a bellwether event for the industry," the analysts said.
"As such, we went ahead and 'baked in' a warning for GM ahead of time," Morgan Stanley said.
Ford Motor has an average investment rating of outperform among analysts polled by Capital IQ, with price targets ranging from $10 to $28.