Posted by: David Kiley on April 23, 2009
Ford Motor Co. got a serious boost from Goldman Sachs Thursday when the investment bank raised its rating and share price target on the automaker, and minimized the chance that it would face bankruptcy in the next 18 months.
“We are adding Ford shares to the Conviction Buy List with a six-month price target of $6 and raising our sector Coverage view to Neutral from Cautious, wrote Goldman Sachs’ Patrick Archambault.
“Our call is driven by the almost unprecedented structural change facing the industry, which we think will redefine Ford and GM profitability, which has substantially lagged peers. Unlike GM, we do not foresee bankruptcy at Ford, which we believe has sufficient liquidity to make it through to 2010 without additional funding. We recognize sector sentiment is likely to be impacted by potential GM and Chrysler filings, but, with 58% upside to our target, we think much of this is in the shares which present a very attractive risk/reward.”
One of the factors making analysts bullish on Ford is the migration of buyers who have been buying GM and Chrysler vehicles, but who are wary of buying them now amidst bankruptcy talk for both companies, to Ford.
According to Edmunds.com, consideration of Ford vehicles has climbed about 8% from last September to last month. The drop in consideration of GM vehicles is also about 8%. According to the site’s data, the Ford Fusion is benefiting from a spike in people who are also cross-shopping the Chevy Malibu and Impala. The Ford F Series is also benefiting from a spike in people cross-shopping Dodge Ram and Chevy Silverado.
If Chrysler goes into actual Chapter 11 bankruptcy or gets liquidated, Ford, many analysts believe will be a huge beneficiary in its retail sales. Edmunds.com senior marketing Analyst Stephen Berkov says, “There is that element of the car buying audience who will continue to want to buy domestic vehicles, and Ford benefits from the fact that their quality ratings hold up very well against Toyota and Honda when they start researching the cars at sites like ours.
Indeed, more than 70% of Ford’s vehicles are recommended by Consumer Reports.
Ford shares are up 78% since the first of the year in mid-day trading today at 4.38. The trading range of Ford share in the last 52 weeks was $1.01 to $8.79.