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There’s a Short-Term Opportunity in Ford Stock, Says Analyst

Ford (F) is a legacy car maker, with none of the glitz attached to the new electric vehicle players. However, so far, this year it is giving the upstarts a run for their money where market performance is concerned.

Shares are up 31% so far this month, 15% of which, the auto giant accumulated over the past two trading sessions. The uptick came after Deutsche Bank analyst Emmanuel Rosner issued a Catalyst Call on the stock, recommending it as a short-term trading opportunity.

“We believe a robust product cycle, favorable pricing environment for US trucks, improved warranty performance, and restructuring savings could result in better-than-expected 2021 guidance, and prompt investors to anticipate a more aggressive turnaround trajectory,” the analyst said.

Rosner expects Ford to post surprisingly positive guidance when it reports 4Q20 earnings on February 4. For 2021, Rosner is anticipating Ebit of $7.5 billion and EPS of $1.20, which is above consensus calls for $6.8 billion and $1.00, respectively. The analyst thinks “management could guide Ebit/EPS well above $7bn/$1.00.”

Rosner says an appealing new product launch cycle, which includes new F-series, Bronco and Mach-E models, is just around the corner, and could potentially “boost volumes and prices,” while the company’s “aggressive” efforts in South America could “garner restructuring savings.”

Also, following years of botched management, which have resulted in ballooning warranty costs - for the first nine months of 2020, Ford’s were more than $2 billion higher than GM’s - the company is “well positioned to flex down warranty expense.”

“These tailwinds,” Rosner notes, “Should more than offset the negative impact from higher commodity costs.”

However, the Catalyst Call does involve some risks including “lower-than-expected 2021 guidance, issues with execution on new model launches and a disappointing message at its CMD (Capital Markets Day).”

While the analyst notes the near-term opportunity, longer-term, however, Rosner’s rating stays a Hold, “pending operational execution, and clarity about Ford’s EV strategy and positioning.” (To watch Rosner’s track record, click here)

According to the analyst consensus, the stock remains a Hold. The rating is based on 3 Buys, 9 Holds and 1 Sell. According to the forecast, the projection is for 17% downside, given the average price target currently stands at $9.55. (See Ford stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.