Ford Motor Company F's stock is down nearly 15 percent over the past year and is trading at a valuation where its F-150 truck franchise alone is worth more than the company's enterprise value, according to Morgan Stanley
Morgan Stanley's Adam Jonas gave Ford's stock a double upgrade from Underweight to Overweight with a price target raised from $10 to $15 (with a $25 bull case).
Ford's stock closed Tuesday at $10.78 per share, which values the automaker at $42.83 billion. The company's F-series truck franchise alone is worth $16 per share (based on 25 percent EBITDA margins at 6 times EBITDA) or roughly 130 percent of Ford's entire market cap, Jonas said in a note. When adding in the value of other truck franchises like Transit, Ranger and E Series, the value of Ford's entire truck business is worth nearly $20 per share or 160 percent of its market cap.
There are several other "blind spots in the investment debate" that supports a bullish stance, Jonas said. These include ongoing U.S. SAAR strength in which a 5 percent change is worth 16 percent to Ford's earnings, savings from management's restructuring plans and initiatives represents a "cheap call option," and benefits from the U.S. infrastructure bill.
Bottom line, Ford is an "out-of-favor self-help story with room to surprise the market" and a bearish stance on the stock that has been in place since 2014 no longer applies, Jonas said.
Shares of Ford were trading higher by more than 3.5 percent at $11.17 early Wednesday morning.
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