Post by TonyV on Apr 28, 2010 14:32:42 GMT -5
April 28, 2010
How much stock to put in Ford rally?
BY SUSAN TOMPOR
FREE PRESS COLUMNIST
Ford Motor's startling $2-billion profit is no doubt Michigan's top feel-good story, and that's a good thing to have in this state at this time.
But do the roaring first-quarter results make Ford stock a good buy?
Before you pull out the checkbook, know that many auto stocks have seen a shocking run-up since funeral coaches were circling the industry about a year ago.
Ford stock closed at $1.58 a share on Feb. 20, 2009. Monday, it hit $14.46 but closed Tuesday at $13.57 a share. In between, we had the short-fix bankruptcies for General Motors and Chrysler, cash for clunkers and a flood of stimulus deals for the U.S. economy.
What's next for Ford?
Some analysts noted that Ford's first-quarter results could be its best of the year. Going forward, Ford's profits will likely be dinged by higher prices for steel, rising interest rates and expected weaker demand in Europe.
Overall, the stock market was slammed Tuesday by more news of Europe's debt troubles. The Dow Jones Industrial Average closed at 10,991.99 points, down 213.04 points, or 1.9%.
Longer term, some analysts say Ford stock has more upside. But be warned, Wall Street watchers do not expect Ford stock to double -- or gain 50% from here -- by year's end.
Erich Merkle, president of Autoconomy.com in Grand Rapids, said Tuesday that his personal opinion is that Ford stock isn't finished climbing higher yet.
Merkle, who owns Ford common stock, said Ford stands to benefit if the U.S. economic rebound is stronger than expected with its new models and further growth in the pickup market.
"You've got a company that's well-positioned to beat expectations going forward as well," Merkle said.
'Buy' recommendation
UBS Investment Research maintained its "buy" on Ford stock Tuesday with a 12-month target of $15 a share. Colin Langan, U.S. auto analyst for UBS, told me Tuesday that he put a "buy" on Ford stock in March 2009 and said Tuesday's pullback could be a buying opportunity.
But Langan cautioned that Ford's performance in the year ahead likely will be held back by a weaker economy in Europe, as well as weaker results for Ford Motor Credit.
Even so, Langan said the stock has the potential to possibly climb above his $15 target.
But Efraim Levy, Standard & Poor's auto manufacturers and suppliers equity analyst, reiterated a "hold" on Ford with a target of $13.60 a share.
He warned that certain costs are expected to rise, such as product launch expenses and commodity prices.
Levy said he expects profit improvement during the remainder of 2010, but noted that further market share gains are likely to be "harder to come by" for Ford as its competitors' difficulties recede.
Thankfully for Michigan, the auto industry has had some better news of late than many expected a year ago. But investors shouldn't kid themselves that Ford's amazing stock ride will continue at the same clip.
How much stock to put in Ford rally?
BY SUSAN TOMPOR
FREE PRESS COLUMNIST
Ford Motor's startling $2-billion profit is no doubt Michigan's top feel-good story, and that's a good thing to have in this state at this time.
But do the roaring first-quarter results make Ford stock a good buy?
Before you pull out the checkbook, know that many auto stocks have seen a shocking run-up since funeral coaches were circling the industry about a year ago.
Ford stock closed at $1.58 a share on Feb. 20, 2009. Monday, it hit $14.46 but closed Tuesday at $13.57 a share. In between, we had the short-fix bankruptcies for General Motors and Chrysler, cash for clunkers and a flood of stimulus deals for the U.S. economy.
What's next for Ford?
Some analysts noted that Ford's first-quarter results could be its best of the year. Going forward, Ford's profits will likely be dinged by higher prices for steel, rising interest rates and expected weaker demand in Europe.
Overall, the stock market was slammed Tuesday by more news of Europe's debt troubles. The Dow Jones Industrial Average closed at 10,991.99 points, down 213.04 points, or 1.9%.
Longer term, some analysts say Ford stock has more upside. But be warned, Wall Street watchers do not expect Ford stock to double -- or gain 50% from here -- by year's end.
Erich Merkle, president of Autoconomy.com in Grand Rapids, said Tuesday that his personal opinion is that Ford stock isn't finished climbing higher yet.
Merkle, who owns Ford common stock, said Ford stands to benefit if the U.S. economic rebound is stronger than expected with its new models and further growth in the pickup market.
"You've got a company that's well-positioned to beat expectations going forward as well," Merkle said.
'Buy' recommendation
UBS Investment Research maintained its "buy" on Ford stock Tuesday with a 12-month target of $15 a share. Colin Langan, U.S. auto analyst for UBS, told me Tuesday that he put a "buy" on Ford stock in March 2009 and said Tuesday's pullback could be a buying opportunity.
But Langan cautioned that Ford's performance in the year ahead likely will be held back by a weaker economy in Europe, as well as weaker results for Ford Motor Credit.
Even so, Langan said the stock has the potential to possibly climb above his $15 target.
But Efraim Levy, Standard & Poor's auto manufacturers and suppliers equity analyst, reiterated a "hold" on Ford with a target of $13.60 a share.
He warned that certain costs are expected to rise, such as product launch expenses and commodity prices.
Levy said he expects profit improvement during the remainder of 2010, but noted that further market share gains are likely to be "harder to come by" for Ford as its competitors' difficulties recede.
Thankfully for Michigan, the auto industry has had some better news of late than many expected a year ago. But investors shouldn't kid themselves that Ford's amazing stock ride will continue at the same clip.