Wall Street hailed Ford Motor's plans to internally separate its legacy and electric vehicle businesses, announced Wednesday, pushing the automaker's stock to its fifth-highest daily gain in the past 12 months.
But Wall Street analysts weren't sold on all aspects of the changes under CEO Jim Farley's "Ford+" turnaround plan for the Detroit automaker.
Some analysts still call for a full spin-off of one of the businesses. Others question whether Ford can achieve a 10% operating profit margin across its businesses by 2026, while increasing global EV production to 2 million units by that timeframe.
Morgan Stanley analyst Adam Jonas, in a note to investors Wednesday, called the EV target "an aspirational/stretch goal." 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 expects Ford to produce 560,000 EV units by 2026 and estimates the company's adjusted operating profit margin on EVs to be only 4% by 2026, not 10%. The research firm first issued those targets prior to Ford's announcement, but maintained the forecast after the update. However Jonas cited there could be some upside they aren't taking into account just yet.
Deutsche Bank analyst Emmanuel Rosner shared similar concerns about Ford's supply chain and production ramp-up. He called the 10% margin "ambitious" and said achieving the goal would require "unprecedented" profitability in its legacy business and substantial increases in production and profitability of its EVs.
"All in, this presents opportunities to expand ICE margins, but we still wonder if it will be enough to reach a 10% margin by 2026 as margin-dilutive EVs take a greater share of total volumes over the coming years," Rosner wrote in an investor note Wednesday.
Ford's stock closed Wednesday at $18.10 a share, up by 8.4% on the day. The stock remains down 13% in 2022.
Overall, Wall Street viewed Ford's plans, including separate reporting of the operations in 2023, as positives but far from a sure thing regarding the new profit margin and EV targets.
"We are positive on the reorg as we believe it will accelerate Ford's transition to an EV world," Credit Suisse analyst Dan Levy told investors Thursday in a note. "However, we believe there are a number of questions that will need to be addressed, and which will determine whether the transition is truly successful."
– CNBC's Michael Bloom contributed to this report.
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