Monday is Ford’s chance to convince Wall Street skeptics of its EV plans
Jim Farley, Ford CEO
DETROIT — Ford Motor on Monday will attempt to turn skeptics of its electric vehicle growth plans, which some Wall Street analysts have called “ambitious” and “crazy high,” into believers.
The Detroit automaker will host its capital markets day, during which it has promised to provide details of how Ford expects to achieve previously stated targets for 8% EBIT margin on its electric vehicle unit and a 2 million EV production runrate by 2026, up from an expected 600,000 by year-end.
“We will take you through why we believe that 8% margin is totally realistic despite all the pricing pressure that we will absolutely get because everyone wants to grow,” CEO Jim Farley said during the company’s first-quarter earnings call earlier this month.
The event is called “Delivering Ford+,” a reference to Farley’s turnaround and restructuring efforts that some have criticized for not being executed quickly enough. Farley announced the plan seven months into his tenure, in May 2021.
The automaker’s CEO described the capital markets day as an opportunity to demonstrate how the strategy is “coming to life.” The company is expected to run through its profit walks for its traditional “Ford Blue” and “Ford Pro” commercial businesses in addition to its “Model e” electric vehicle unit.
Ford also is expected to preview its second-generation battery products and technology, which the company has said will be crucial to achieving that 8% EBIT margin. The EV business is expected to lose about $3 billion this year.
Ford previously said it expects to hit that profit margin largely through scale, EV battery improvements and efficiencies in design and engineering.
“There’s definitely some analysts that are skeptical,” Morningstar analyst David Whiston told CNBC. “I think Monday is an opportunity to try and convince some of those skeptics that it can happen. I’m personally willing to give them the benefit of the doubt on that … you’ve got to win people over.”
Whiston described the timeline for the targets as “tight.” Others have been more critical.
Morgan Stanley analyst Adam Jonas during Ford’s first-quarter earnings call described the EV production increase as “crazy high.” Barclays analyst Dan Levy in a note to investors this week called it “ambitious.”
“Currently, we are skeptical as to Ford’s ability to meet both targets, as we expect it to opt for a balance of volumes with profit opportunities,” Levy said.
Analysts don’t expect much movement in the stock from the event, unless Ford surprises with a new product or change in previously announced plans.
“Overall, we think Ford’s key targets are unlikely to be different from its recent teach-in session, but management will attempt to give investors more comfort around them,” Deutsche Bank analyst Emmanuel Rosner said Wednesday in an investor note, reiterating the firm’s sell rating on the stock.
Ford stock is rated “hold” with an average target price of $13.63 per share, according to analyst ratings and estimates compiled by FactSet.
Shares of Ford are up by about 75% since Farley became CEO in October 2020. The stock closed Friday at $11.65 per share.
– CNBC’s Michael Bloom contributed to this report.