Though The Blue Oval has struggled with things like recalls, quality issues, and associated warranty costs for a few years now, Ford stock has also performed quite well for periods amid investor confidence in the automaker’s future plans. However, with EVs not quite taking off as most expected and inventory piling up, Ford stock has since suffered a bit, prompting more than one investment firm to downgrade it. Now, that list has expanded to include yet another financial outfit.
That firm is Jefferies, according to Investing.com, which has downgraded Ford stock from Hold to Underperform while also lowering its price target from $12 to $9. This now makes nine different analysts that have adjusted their outlook on Ford stock downward in recent weeks, including Morgan Stanley and Bernstein. As for its reasoning behind this decision, Jefferies cited a few factors – including soaring inventory levels, a fair financial health score, weak gross profit margins, Ford’s struggles in Europe, and high warranty costs, which offset strong sales as of late.
As Ford Authority previously reported, FoMoCo has long held one of the highest inventory levels of any brand that sells vehicles in the U.S., which was once again the case in November as The Blue Oval remained far above the industry average in that regard. Additionally, Ford had the highest level of 2024 model year inventory of any brand at the beginning of November as well – more than 400,000 units sitting on dealer lots, in fact.
As for warranty costs, they grew by $800 million in Q2 2024 compared to Q1, leading to a massive impact on profits. According to Ford CEO Jim Farley, that sharp rise can be attributed to SYNC-related woes – though he also noted that these problems can be fixed more easily and cheaply thanks to over-the-air updates. Looking ahead, Ford still expects to hit its warranty cost targets for the entirety of 2024, in spite of this massive jump, but it’s not terribly surprising that investors are a bit skeptical, regardless.
Comments
Ford deserves the downgrade for all the reasons cited. The inventory level is baffling. As noted here, there are 400,000 Fords sitting on the lots and days to turn is abysmal. TV commercial during football for F-150s yesterday was for $1,000 off. Wow. That will really move that bloated inventory. There will be 2024s on the lots at the end of next year at this pace. What is Ford waiting for? They need to move product NOW.
I’d downgrade on the missed deliveries of BlueCruise alone.
There is more to Ford warranty cost than simple sync problems….until they start getting rid Ecboost Engines for one and make a simplier engine..be a place to start….also rear ends on Ford products use to be rock solid and take a lot of punishment….now its a constant problem for years….pinion bears go out…and the mechanic say keep oil change in differental…unreal..i never in owning 7 Ford van 5 pickups in busines carring and abusing them…never had any issues in 40 years…now it a constant problem…Recall after non stop recalls….is not what a customer wants…..and they go else where.
This happened with Japan in the 1970’s, the quality and style of US cars were garbage but got better after the Japanese started selling cars in the U.S., the Japanese did us a favor by forcing our car companies to change. The Chinese are now doing the same thing, and because the average price of a new car in the US is now just under $50k, it seems the Chinese have done us a favor and will force our car companies to produce better and more affordable cars.
The auto companies want to change their existing operations rather then create a new company, Ford and GM should continue to build and sell as many gas powered vehicles as they can and use the proceeds to fund a new company rather then try to change the existing companies. As the market changes, the gas powered companies scale down while the electric companies scale up…that way they’re not trying to save GM and Ford but rather creating a new company that will eventually replace them.
Never gonna happen. The only way to compete with the Chinese is to have everyone work for a $1 an hour. I’m sure you’re not going to have too many takers for that wage in this country. The only “favor” Chinese car companies will do is to put our automakers out of business.