Ford just hit a $100 billion market cap — why its stock may crash 52%

The wins keep piling up for Ford (F).

Impressive orders for the new electric F-150. Ford scion Bill Ford buys a chunk of the stock in a show of confidence. This week, the auto giant’s market cap topped $100 billion, while rival GM (GM) remains neutral at around $89 billion. Despite these flashy headlines, veteran auto analyst Adam Jonas of Morgan Stanley believes that Ford shares have gotten ahead.

How far ahead? The veteran numbers analyst said in a new note that he sees Ford shares down 52% to $12. Your rating on one of the hottest stocks on the market? Underweight, or the equivalent of Sell.

“The stock market’s attraction to the Ford EV story continues to take us by surprise,” acknowledges Jonas.

Wall Street’s newfound optimism about Ford stock reflects the ongoing operational shift at the company under CEO Jim Farley and Chief Executive Officer Bill Ford’s push for greener cars. Ford’s strong third-quarter earnings also helped.

Ford’s third-quarter adjusted earnings came in at 51 cents a share, topping analyst estimates of 27 cents. Net sales of $33.2 billion beat analysts’ projections by about $800 million even though a shortage of semiconductors is hurting production levels.

For the full year, Ford estimates adjusted earnings of $10.5 billion to $11.5 billion. Previously, Ford expected earnings of $9 billion to $10 billion. The company also reinstated its dividend, which it had cut at the height of the pandemic in 2020.

Jonas argues that most of these factors are now factored into Ford’s share price, a stock that has soared 155% in the past year. On the other hand, there are a number of downside risks to Ford stock that the market may be missing according to Jonas’ math.

“Our concerns start with cyclical mean reversion. This is not just a Ford issue, but an industry-wide issue. While auto companies will enjoy production recovery and inventory replenishment, we believe this will compound with price falls, deterioration of the mix (channel and product) and the increase in input costs,” says Jonas. From a $25 level, we believe that expectations for Ford’s success in electric vehicles, while possible to achieve, are hard to beat. We expect a much more intense competitive environment among EVs from the likes of Tesla, Rivian, legacy OEMs and other startups.”

Ford CEO Jim Farley poses with the Ford F-150 Lightning pickup truck in Dearborn, Michigan, U.S., May 19, 2021. Picture taken May 19, 2021. REUTERS/Rebecca Cook

Ford CEO Jim Farley poses with the Ford F-150 Lightning pickup truck in Dearborn, Michigan, U.S., May 19, 2021. Picture taken May 19, 2021. REUTERS/Rebecca Cook

But even Jonas admits that Ford shares could maintain their bullish bias in the short term.

“The window of opportunity for stocks to enjoy a combination of a supportive cycle, strong ICE performance (price peak and mix), as well as the promise and excitement of upcoming EV launches, may continue during the first half of this year,” adds Jonas. .

In other words, don’t rule out more wins.

brian sozzi is a general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

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