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The all-electric Ford Mustang Mach-E could rival Tesla vehicles.
David McNew / Getty Images
The latest vehicle to hatch
Ford‘s
the iconic Mustang brand is a fully electric, sporty crossover. And it could be bad news for Tesla.
The
Ford Motor
Mach-E started shipping in late 2020. JP Morgan analyst Ryan Brinkman drove the car on Thursday and liked what he saw. If traditional automakers start building desirable electric vehicles, that could pose a significant threat to
Tesla,
which has so far largely dominated that space in the US.
After driving the car – what
Ford
(ticker: F) Tags SUV – Brinkman “walked away in awe of the Mach-E and also saw negative repercussions for Tesla’s sky-high rating.” The car offers three driving modes: Whisper, Engage and Unbridled. Each offers more aggressive acceleration than the last.
The Mach-E most closely resembles a Tesla (TSLA) Model Y. “We don’t want to argue that one vehicle is necessarily superior to another,” Brinkman writes. But he points out that the Mach-E is still eligible for a $ 7,500 federal tax credit. Tesla has sold too many cars to still qualify for that purchase subsidy.
Its broader point is that the Mach-E is a good car, comparable to a Tesla. So far, that’s not something car buyers could say about many electric vehicle offers.
Better electric vehicles from Tesla competitors can hurt Tesla’s valuation. Tesla is trading for more than 17 times its estimated sales in 2021.
Ford
and other traditional car manufacturers trade for a fraction of that multiple. The auto industry is just not used to those kinds of multiples of growth stocks.
Brinkman, for his part, is a remarkable Tesla bear, with one of the lowest price targets on Wall Street. He is reviewing stock sales and his target price is only $ 105 per share. Tesla shares added more than that amount this week alone, trading around $ 880 on Friday.
Brinkman rates
Ford
Hold shares. His target price for that stock is $ 10.
Barron’s is slightly more optimistic about Ford than Brinkman, recently wrote positively of the automaker, believing that new leadership would result in lower costs and more streamlined vehicle development. More electric vehicles are also needed, such as the Mach-E.
Since that article came out in late November, Ford’s stock has fallen 1%. The
S&P 500
and
Dow Jones Industrial Average,
for comparison, about 5% and 4% are up respectively.
To say that the threat of new competition hasn’t hit Tesla’s stock is an understatement. Tesla shares are up 50% since late November. Better-than-expected deliveries and analyst upgrades have helped Tesla’s stock rise further. Shares gained about 740% in 2020. Shares are up about 25% to date.
On Friday, Ford’s stock fell 0.6%. Tesla shares were up 7.8% and closed at a new record high. Investors seem to love EV stocks no matter what time frame is viewed. Ford stock fell by about 6% in 2020.
Barron’s did not select or pawn any Tesla stock. Right now, about a third of analysts buy from Tesla stock prices. The average buy rating ratio for stocks in the Dow is approximately 57%. That’s a bit better than Ford: About 22% of analysts who watch Ford stock prices buy. They have not yet taken over the turnaround under new CEO Jim Farley.
Write to Al Root at [email protected]