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Barclays upgrades Ford as partnership with VW takes fight to Tesla

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Barclays has upgraded Ford Motor Co (NYSE:F) as the US carmaker looks to accelerate its move into the electric vehicles market using Volkswagen’s modular electric technology.

“While we have liked Ford’s product cycle and profit improvement potential under an energetic new CEO, the lack of a clear, aggressive BEV strategy kept us on the sidelines,” the bank said.

READ: Ford Europe to make only electric passenger cars by 2030

After a deep-dive examination of Ford Europe and in particular its alliance with VW, Barclays said it is now “more comfortable with the margin improvement outlook”.

More importantly, leveraging the VW MEB (Modularer E-Antriebs-Baukasten) platform, is felt by the bank’s analysts to be likely to “shift much more aggressively than consensus believes toward BEVs in the 2025-2030 period”.

Ford is expected to highlight a BEV strategy centred around two dedicated BEV platforms at upcoming investor day, having recently announced that by mid-2026, 100% of its passenger vehicle range in Europe will be zero-emissions or hybrid, before a move to all-electric by 2030.

Barclays upped its share price target for Ford to US$16.

EV sales trends

Ford’s electric Mustang Mach-E has done well as it began making deliveries of its all-electric SUV, cutting some of Tesla’s lead in the EV market, according to a recent Morgan Stanley report.

In the US, Ford sold 3,739 of its new EV in February, with Tesla’s share of the EV market slipping to 69% from 81% the year before. 

Ford’s overall sales were down 15% for the month compared to a year ago, though.

For the whole of 2020, the global EV market was led by Tesla, which sold almost 0.5 vehicles for a 16% market share, though this was down from 17% in 2019 as VW and others played catch-up.

VW’s electric sales reached 422,000 for a 13% share for the whole of 2020, but in the fourth quarter, VW claimed top spot, selling 191,000 compared to 183,000 for Tesla.

And in the European battery-electric vehicle market in December, VW further outshone Tesla, with 49,704 all-electric EV almost doubling Tesla’s registrations according to research from Jato Dynamics, with the new VW ID.3 beating Tesla’s Model 3 and becoming the second best-selling car overall for the month.

VW target also hiked

Barclays also noted the significant surge in Volkswagen Group (XETRA:VOW) trading volumes over the last couple of weeks, led by a 20-fold pickup in volumes in the US-traded American depositary receipts ADR (OTCMKTS:VWAGY) as the German carmaker’s intensifying challenge to Tesla got a lot of media coverage.

The analysts said they like VW for fundamental reasons, including its “BEV leadership” and strong free cash flow, with Barclays share price target hiked to €260 on the back of this week’s ‘Power Day’ presentation.

“We think not only institutional, but also a wave of private investors is increasingly interested, which can also be seen from spiking Google search trends.”

Google Trends has highlighted a strong spike in ‘interest over time’ in the VWAGY ADRs over the last week, following months of much lower search interest, with a fivefold spike in search interest as well as strong increases in news coverage and Twitter mentions, the analysts noted.

“We don’t think this trend will abate any time soon and will keep close track of this development.

“We think VW ticks all the right boxes and remains very attractively priced,” they added, with the shares trading at 7.4 times 2022 expected earnings per share, “although valuation would matter less for retail shareholders in our view”.

Barclays and Bernstein both highlighted the “key value opportunity” in Porsche Automobil Holding (ETR:PAH3), which owns more than half of VOW ordinary shares.

“We would note that the mark-to-market of this holding would put its fair value at €146 per share vs the current price of €84. Porsche shares are only +11% vs the VW ords +58% since Thursday night, offering a big revaluation opportunity, in our view.”

Story by ProactiveInvestors


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