Yesterday, we took a look at legacy automaker Ford (F) and its plans for Ford Energy, a subsidiary that will start selling off the batteries Ford has produced to provide stability to power grids. Ford managed to land some attention from Morgan Stanley (MS) analysts over this, and that attention set Ford investors on a riot of share purchases. Ford shares blasted up nearly 16% in Wednesday afternoon’s trading.
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Ford Energy’s plan to produce and sell battery energy storage systems (BESS) brought with it a research note from Morgan Stanley analyst Andrew Percoco, who has a five-star rating on TipRanks. Basically, Percoco expects that Ford will set up a “…supply agreement with large commercial customers, and potentially hyperscalers, over the next few months.”
That by itself would be quite a win, but then Percoco and team put a dollar estimate on the amount of business Ford Energy could do. With its planned 20 gigawatt-hours of production, Ford could ultimately realize between $500 million and $600 million just from the battery business. Given that the demand for data centers and artificial intelligence (AI) operations is surging in the United States to the point that chips are increasingly hard to find, Ford’s plan to help supply continuous energy to these operations just makes sense.
Suppliers on Notice
Meanwhile, Ford is taking a much closer look at its suppliers, and is actually excluding some of them from seeking future contracts with Ford. Suppliers with quality issues are reportedly finding themselves on the “no bid” list, and some parts makers are being expected to start three-year cost-savings plans, or end up on that list themselves.
These plans, called total value management (TVM) plans, are not unusual in the auto business. However, Ford’s use of them is much more unusual, as Ford is requiring these plans in order to do business with Ford. Ford has been working to tighten supplier management for some time now. So this effort, while a bit aggressive, actually fits into that idea smoothly.
Is Ford Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Hold consensus rating on F stock based on three Buys, nine Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 12.58% rally in its share price over the past year, the average F price target of $13.69 per share implies 1.49% downside risk.
