Shares of Ford Motor Co. rose Tuesday after a leading Wall Street analyst upgraded the struggling automaker based on the company’s enhanced cash position, cost-cutting, and new products that the company has shown media and analysts in recent weeks.
Morgan Stanley’s Jonathan Steinmetz upgraded the automaker from “equal weight” to “overweight” and set a price target of $9.50. Ford shares closed Tuesday at $7.18, up $0.15. Ford shares have traded in a range of $6.06 to $9.48 in the past year.
Ford recently raised more than $20 billion in a new series of secured debt issues. That includes some debt it refinanced at a lower interest rate by backing the securities with hard assets, as well as new debt. The offerings were over subscribed.
CEO Alan Mulally, who joined the company in September, has been going through the company to cut costs and reduce engineering and product development complexity. And the company has been moving up launch dates of some of its future products. Ford says it believes its market share, now at 16.5 percent, will stabilize at about 14 percent, with 11 percent being retail business.
"Ford has product challenges near-term. We believe that Ford's product portfolio, however, can get better over a three- to five-year period. It has shown improved quality, the pipeline shows some promise, and the Ford brand retains decent consumer loyalty/dealer throughout," said Steinmetz. The analyst said that an improved Ford could reach a share price of $12 to $15 by the end of 2010.
He said the risk of bankruptcy over the next two to three years is low.