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Morgan Stanley's Bold Calls for Ford, While GM Rallies on Earnings

In the ever-evolving landscape of the U.S. automotive sector, both Ford (F) and General Motors (GM) are making headlines with strategic moves that could reshape their trajectories.

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Ford Takes Pole Position, Embracing Change


Morgan Stanley's automotive analyst, Adam Jonas, has made a groundbreaking call, placing Ford at the forefront of the U.S. automaker hierarchy. In a strategic move, Jonas suggests Ford scales back spending on electric vehicles (EVs) amid the industry-wide shift. Surprisingly, the deceleration in EV adoption is seen as an advantage for Ford.

While tangible progress may unfold gradually, Jonas emphasizes Ford's ability to act decisively and shield against potential value erosion. In response to the transformative shift in the global auto industry, Morgan Stanley sets a robust price target of $15 per share, signaling a substantial 28% upside. A bullish bull case estimate of $21 per share adds to the optimism, with Ford's 5.1% dividend yield appealing to investors seeking growth and income.

As Ford gears up for its Q4 results on February 6, the stock witnessed a notable upswing, surging by 3% on Thursday. In an industry undergoing a transformative paradigm shift, Ford's strategic recalibration has positioned the automaker for potential resilience and growth.

Morgan Stanley supplements its endorsement of Ford by elucidating four key reasons in a note to investors. Recognizing the global auto industry's transformative shift, the firm commends Ford's acknowledgment that its current EV strategy, conceived in 2021/2022, might be unsustainable.

General Motors Accelerates Amidst Challenges

Meanwhile, General Motors (GM) took the spotlight on Tuesday with an upward trajectory fueled by robust Q4 results and optimistic guidance for 2024. Despite a 54% year-on-year decline in adjusted earnings before interest and taxes (EBIT) to $1.76 billion in Q4, GM's strategic resilience shined through.

The UAW strikes took a toll, with a $900 million EBIT-adjusted impact in Q4 and a $1.1 billion impact for the full year. However, GM's management expresses confidence in the U.S. economy's resilience, anticipating robust industry sales of approximately 16 million units.

GM outperformed competitors in the U.S. market in 2023, securing increased market share with strong margins. Notably, GM's success in the affordable quadrant and its upcoming ICE models showcase the company's diverse and appealing portfolio.

Addressing the EV landscape, GM acknowledges a slowdown but remains optimistic about forecasts predicting a rise from 7% to at least 10% in U.S. EV deliveries for 2024. Despite challenges in China, GM foresees a return to profitability starting in Q2.

Conclusion

In summary, GM's Q4 results exceeded expectations, considering the impact of UAW strikes, and the bullish 2024 guidance fuels positive investor sentiment. This robust performance may set a positive precedent for Ford as it prepares to report next week. The automotive industry is witnessing transformative shifts, and both Ford and GM are navigating this changing landscape with strategic moves.


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