Ford Motor Company (NYSE: F) is providing a glimmer of hope as we open the door to 2021. Bulls, in particular analysts, are confident Ford stock will continue to gain in 2021. However, the bears are not backing down as they expose the gapping debt holes in the business. This article will look to provide the bearish and bullish Ford Motor stock forecast for 2021.
Table of contents
Bullish Forecasts for 2021
Analysts and price forecasts
Analysts and Ford Motor price forecasts remain slightly bullish come 2021. Amongst 16 Wallstreet analysts, 9 have listed a Hold rating while 5 have determined a Buy rating. The average 12 month price target is at $9.48 a share. This suggests an downside of 15% from the current trading price. Here are some of the more recent price target forecasts from analysts at larger financial institutions:
2/05/2021 Benchmark – analysts at Benchmark increased their 12 month price target from $12 to $14 a share, suggesting an upside potential of 26%
01/29/2021 Morgan Stanley – analysts at Morgan Stanley have downgraded their rating for Ford from Equal Weight to Underweight. The company also reiterated their 12 month price target at $9 a share.
10/29/2020 Bank of America – analysts at BoA boosted their 12 month price target from $9 to $10.50 a share. This suggests an upside potential of 19% from the current trading price.
Ford does have a lower end price targets as low as $4.90 (36.6% potential loss). However, when reviewing price targets the most recent provides better insight into the current consensus amongst institutions in comparison to older price targets.
The primary area of financial concern going into 2021 is Ford’ motors rising debt levels. Ford Motor’s debt sits at $175.230 billion. When investors look at debt, they want to know two things. First, is debt, along with the D/E ratio rising or decreasing? Second, does the business have enough cash, not profit, to service its outstanding debt? In answer to the first question, Ford’s debt pile is increasing. For example, Ford’s debt is up 12% Year on Year (YoY). Not to mention their bearish D/E ratio of 567.9%. However, the main issue is that Ford’s cash reserves total $39.3 billion, creating a net debt of approximately $136 billion. If we stop here, we get the big picture in terms of debt.
However, if we hold a microscope over the liabilities for the next 12-months then we get more information. Ford Motor’s has liabilities of $92.8 billion falling due within a year. To pay down the short-term liabilities, Ford only has $39.3 billion in cash and $9.11 billion in receivables. Consequently, creating a massive liability-cash flow disparity. Investors would want to watch Ford’s balance sheet before investing, to see if the company is turning around its nightmarish debt situation. Because if the creditors came knocking today, then Ford would require a significant re-capitalisation. Thus, from a debt level, investors should not take the bearish claims lightly. Furthermore, on top of mounting debt issues Ford is reporting negative earnings. For example, For Motor’s loss came in at $2.2 billion. Therefore, the current financial situation is more of nightmare despite the dream of a brighter future.
We remind our viewers that this article is not financial advice but rather investment commentary from extensive research.
Overall, Ford Motor company has performed well in the recent months, which is being reiterated by majority of analysts. The high end targets of $14 a share will definitely excite shareholders as we move into 2021. However beneath the surface lies debt-cash issues which significantly increases the risk for existing and new Ford investors. Therefore the financial health of the company needs to be priced into your own risk management strategy. (Opinion not advice)
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Patrick McLoughlin and information updated by Tyger Fitzpatrick (04/01/2021)