Ford Motors (F) is exploring ways of unlocking optimal value from its electric vehicle (EV) operations. Bloomberg reports that Chief Executive Officer Jim Farley is considering separating the electric operations from the internal combustion engine business. F shares rose 2.85% to close at $18.04 on February 18.
Ford is an automobile company that designs, manufactures, and sells cars and trucks. It produces cars under two brand names; Ford and Lincoln. Ford’s upcoming earnings report for Q1 2021 is scheduled for April 28, 2022.
Ford Restructuring
According to people familiar with the matter, a spin-off of one of the businesses is a possible option under consideration. By spinning off the electric operations, Ford could achieve the kind of multiples that Tesla (TSLA) has enjoyed by focusing on electric vehicles.
However, splitting Ford into two business units could prove to be troublesome. The Ford family, which controls the company through a special class of stock, poses the biggest challenge on the spin-off push. The CEO may therefore end up separating the EV business internally, according to the Bloomberg report.
Ford has come under immense pressure on Wall Street to spin-off its EV business and is seen as its best option to boost value. Pure electric vehicle plays, such as Rivian Automotive (RIVN), continue to enjoy premium valuations in the market.
Stock Rating
Earlier this month, Morgan Stanley analyst Adam Jonas reiterated a Sell rating on Ford and raised the price target to $13 from $12, implying 27.94% downside potential to current levels.
According to the analyst, expectations for the automaker’s core ICE business and fast-growing EV business are high despite the serious execution risk at hand.
Consensus among analysts is a Moderate Buy based on 8 Buys, 7 Holds, and 2 Sells. The average analyst price target of $23.63 implies 30.99% upside potential to current levels.
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