It was a big day for Ford
Motor stock
today, which had the highest trading volume in the S&P
500 and was
the index's fifth-best performer. The auto maker's shares added 4% to close at
their highest level since all the way back in April of 2015. It extends the
stock's run to some 110% in just under a year.
The catalyst for the surge
in Ford shares has been a simultaneous improvement in the company's near-term
and long-term outlooks. Al Root explains:
According to [Credit
Suisse analyst
Dan Levy], Ford is managing the 'two
clock problem' better these days. Two clocks is Levy’s metaphor for the
problem all traditional auto makers have. Auto makers need to post strong
results now as the economy improves, but they also need to transition to an
electric vehicle-centric world, which requires efficient capital management and
product development.
Levy upgraded his rating
on Ford stock to Buy, from Hold, on Wednesday and gave the shares a
price target some 33% above recent levels.
Despite a pervasive lack of
semiconductors, labor shortages, and other Covid-19 related challenges, Ford
has managed to impress investors and analysts with its results each quarter
over the past year or so.
The company, meanwhile, has
announced new or accelerated existing EV investments and products, such as the
F-150 Lightning (Al got to test drive that electric pickup
earlier this month). That's taking care of the future and laying the
groundwork for long-term prosperity.
Investors and Wall Street
have come around. When CEO Jim Farley took the reins about a year ago, only 21% of
analysts recommended buying Ford shares. Now, nearly two-thirds do. And their
average target price on the shares has more than doubled. It's a big shift in
sentiment.
Ford's next test comes in a
week, when it reports third-quarter results. Read more from Al on the stock's
latest upgrade here.
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