Key points:
- Automaker investors might be in for a slippery year ahead
- Jefferies cut Ford's price target from $20 to $18, citing a wider inflation thesis
- Operating output could drop from between 15%-30% amongst automakers
Inflation seems to be the only stable in a world of tumultuous uncertainty. With investors rotating out of high-growth tech stocks into more steadfast, low-risk alternatives, Covid variants are wreaking havoc on supply chain logistics, and inflation continuing to weigh on the wider industry; it's a difficult time to analyze potential upsides.
This story is no more appropriate than for the automaking industry. We’ve seen numerous companies, from EVs to ICEs, all point to problems in production thanks to inflationary pressure. Just last month, Rivian backtracked on a decision to combat inflation by increasing the sale price of its pre-order vehicles. Similarly, Tesla announced today that they will be increasing the cost of their vehicles as a result of inflation.
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Ford (NYSE: F) is arguably one of the best-positioned companies moving forward. Embarking on a strong EV journey whilst maintaining a pipeline of traditional vehicles, the Ford F-150 Lightning has propelled Ford into the top-end of the EV market, securing widespread interest across the US. However, it’s time to look at Ford through an inflationary lens. Ford's long-term status stands firm, but the company might well suffer over the next year or so, with potential production cutbacks, rising costs, and supply constraints.
Jefferies analyst Philippe Houchois argues a similar sentiment, lowering Ford’s price target today to $18 from $20. The chance comes as a widespread edit for the Firm, pricing in the reality of a “stagflationary environment” based around the rising input costs and supply issues that affect the entire market. Houchois believes that operating numbers might drop as much as 30% for automakers; how will this affect Ford’s bold EV masterplan?