Why Deutsche Bank Downgraded Ford
Deutsche Bank's Rod Lache on Monday downgraded shares of Ford Motor Company (NYSE: F) to Hold from Buy with a $16 price target.
Shares of Ford were trading 7 percent away from Lache's $16 price target, implying a more cautious approach towards investing in shares of Ford (and the overall U.S. auto sector) as the sector faces "significant prospective challenges."
"We believe that U.S. vehicle affordability is reaching an inflection point," Lache wrote. "The prospective regulatory cost burdens facing U.S. Automakers are unprecedented."
The analyst notes that Ford's new F-150 truck is one of the "most prominent" examples of how vehicles are reaching an inflection point. The analyst questions if consumers will pay higher costs for the F-150's "advanced but costly powertrain, light-weighting and safety technologies" even when the price of gas hovers between $2 to $3 per gallon.
Lache concludes by stating that "at the very least" a combination of rising new car prices, falling used car prices, a rising rates environment and a strong U.S. dollar vs. the Japanese Yen will likely "perpetuate questions" regarding the implications for ownership cycles, industry mix, pricing and U.S. automakers' competitive positioning.
Shares of Ford were down about 0.3 percent in the premarket at $14.95.
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