Ford Shares Under Pressure

Shares of Ford Motor took a hit on Monday as Jefferies analyst Philippe Houchois downgraded the stock from Buy to Hold. While the price target was adjusted from $17 to $15 per share, it resulted in a drop of 1.2% for Ford’s shares in early trading. In contrast, the S&P 500 and Dow Jones Industrial Average futures remained relatively stable with a modest 0.1% increase.

This downgrade comes on the heels of recent losses experienced by Ford. After reporting better-than-expected earnings for the second quarter, the company faced a decline of approximately 5% in its stock. However, the setback was not solely due to financial performance but rather stemmed from the company’s revised electric vehicle (EV) goals. Ford announced a delay in achieving its EV production rate target, pushing it back from the end of 2023 to the end of 2024. As a result, growth in the EV division named Model e will be slowed, potentially mitigating EV-related losses.

Jefferies analyst Houchois recognizes the cautious decision made by Ford to safeguard profits, highlighting that slowing down the pace of loss-making sales is sensible. However, he views the change in Model e guidance as a setback, particularly so soon after Ford’s Investor Day on May 22. With a sense of regret, Houchois stated, “With a heavy heart, we cut Ford to Hold.”

Amidst this downgrade, Houchois suggests that Stellantis (STLA), the parent company of Chrysler, may offer a more promising investment opportunity within the Detroit-three auto makers. As Chrysler’s well-known brands like Jeep and Ram become part of the European auto giant, it stands out as a potential better bet compared to its American counterparts General Motors (GM) and Ford.

In conclusion, Ford finds itself facing challenges and undergoing cautious adjustments to its EV plans. While reassessing the situation, investors should consider alternative options within the auto industry, such as Stellantis, which appears more resilient in the current landscape.

Stellantis Shares Remain Attractive Despite Strong Performance

Stellantis shares have performed well following their impressive financial results, but their low valuation multiples continue to make them an appealing investment opportunity. On July 26, the company reported numbers that exceeded expectations, resulting in an approximately 11% increase in share value. However, even with this increase, Stellantis shares are still trading at less than 4 times the estimated earnings per share for 2024. In comparison, Ford stock trades at about 7 times its estimated earnings, while GM shares trade at less than 6 times.

Analyst Ratings and Price Targets

Houchois, an analyst, rates Stellantis shares as a Buy and has set a price target of $25.30 for the stock. On the other hand, he rates GM stock as a Hold with a price target of $39.

56% of analysts covering MGM stock rate it as a Buy, surpassing the average Buy-rating ratio for stocks in the S&P 500, which stands at approximately 55%. When it comes to Stellantis shares, about 82% of analysts rate them as a Buy, reflecting a strong buy-rating ratio. Ford stock, however, falls behind with a buy-rating ratio of about 35%.

Projected Targets and Growth Potentials

For GM stock, the average analyst price target is around $49 per share, indicating a potential increase of almost 30% from the current levels of around $38. Similarly, the average target price for Stellantis shares is approximately $25, reflecting a growth potential of about 25% from the recent levels around $20. As for Ford shares, the average target price is approximately $14.60. These shares recently closed at $13.26.

In conclusion, despite the already strong performance of Stellantis shares, their low valuation multiples make them highly attractive. Analysts continue to rate them as a Buy, with optimistic price targets that suggest significant growth potential in the near future.