Thursday, Selesky increased his Ford Motor (ticker: F) stock price target to $29 a share from $20. The stock closed at $24.45 for a gain of 3.3%, while the S&P 500 fell 0.1% and the Dow Jones Industrial Average dropped by 0.5%.
Things are looking even better than when Selesky upgraded the shares to Buy in February.
“We continue to be encouraged by the company’s strengthening balance sheet and clearly defined financial targets. We believe that supply-chain problems and semiconductor chip shortages will soon dissipate and provide greater opportunities for higher revenues and earnings performance,” wrote Selesky. “On another positive note, on January 4, 2022, Ford announced that it would nearly double the annual production of its electric F-150 Lightning pickup truck to 150,000 vehicles, up from 80,000 initially, due to rising customer demand.”
His $29 target is the new highest mark on Wall Street, according to Bloomberg. The prior high came from Tudor Pickering analyst Jeoffrey Lambujon, whose target is $26.
Ford is in the unusual position of being liked by Wall Street analysts, but having an average price target that is below where the stock trades. About 54% of analysts covering Ford stock rate it at Buy, but the average target price is just above $20 a share, implying a drop of about 18% from recent levels.
The average Buy-rating ratio for stocks in the S&P 500 is about 55%, while the average analyst price target implies a gain of about 10%
Analysts’ price targets can be interpreted a couple of ways. Generally speaking, a price target is the amount an analyst thinks an investor can pay for a stock, and still receive a normal return out into the future. Over the very long run, the S&P 500 has earned investors about 10% a year on average including dividends.
The ‘buy-a-stock-that-will-drop’ situation can happen when a stock price rises rapidly. That appears to be the case this time. Ford stock is up about 73% over the past three months. Moves such as that leave analysts with the option to either downgrade a stock or raise target prices. Selesky, for his part, raised his price target.
Write to Al Root at firstname.lastname@example.org