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Wall Street praises Ford’s EV plans, questions sales and profit targets

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Ford Motor Co. F-Series trucks are being assembled at Dearborn Truck Plant, Dearborn on January 26, 2022.

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Wall Street hailed Ford Motor’sInternal separation of the company is planned legacy and electric vehicle businessesThe announcement Wednesday by the automaker pushed its stock to the fifth-highest daily gain for the past twelve months.

Wall Street analysts didn’t like Jim Farley’s “Ford+” turnaround plan.

Analysts still advocate for the full-scale spin-off one or both of these businesses. Ford may not be able to achieve this, however. 10% operating profit marginIt will expand its operations by 2026 while raising global EV production by 2 million units.

Morgan Stanley analyst Adam Jonas called Wednesday’s EV goal “an aspirational/stretch target” in a Wednesday note to investors. He cited little confidence in Ford — and others such as General Motors, which has announced similar goals — to secure enough raw materials, tooling and supply chain resources “in sufficient quantity and quality/efficacy to deliver on an EV number anywhere near this level within 4 years.”

Morgan Stanley predicts Ford will produce 560,000 EVs in 2026. It also estimates that Ford’s adjusted operating profit margin from EVs is only 4% and not 10%. Jonas said that there may be upsides the research company isn’t considering yet.

Emmanuel Rosner, a Deutsche Bank analyst, shared the same concerns regarding Ford’s production ramp-up and supply chain. The goal of a 10% margin is “ambitious,” he said. To achieve this goal it would take “unprecedented” profitability in Ford’s legacy business, as well as substantial production increases and profit enhancements for its EVs.

Rosner said Wednesday that this presented opportunities to increase ICE margins. However, we remain unsure if that will suffice to achieve a 10% margin in 2026, as margin-dilutive EVs account for a higher share of all total volumes in coming years.

Ford closed Wednesday’s trading at $18.10 per Share, an increase of 8.4% over the previous day. In 2022, the stock is still down 13%.

Wall Street saw Ford’s plans and separate reporting for operations in 2023 as positives. However, it was not certain of Ford’s new profit margin.

Credit Suisse analyst Dan Levy stated that he was positive about the restructuring because he believes it would accelerate Ford’s shift to an electric vehicle world. However, there are many issues that need to be resolved, and these will impact the success of this transition.

– CNBC’s Michael BloomThis report was contributed by you.

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