Analysis: F GM

Following yesterday's run to a new 52-week high that we chronicled in our Alert here, shares of Ford (F) are extending further into new high territory in today's session and were trading more than 8% higher at the time this was written.

The surge higher comes despite no release of new information by the company, but we know President Biden will make a clean energy push a priority of his administration and that bodes well for any manufacturer of electric vehicles. What has also occurred over the past few weeks is a wholesale revaluation of traditional Auto OEMs like Ford and (GM) , with the catalyst being the huge amounts of money that is being raised by GM's Cruise subsidiary and also Rivian, an electric automaker who Ford made a strategic investment in back to 2019 and was recently valued at $27.6 billion based on its latest investment round. When we initiated our position in Ford back in November in our Alert here, we made it a point to call out this strategic investment.

Look, you know our thoughts on Ford by now. We are huge believers in CEO Jim Farley and in the turnaround he is orchestrating. He is getting Ford out of selling cars in unprofitable regions, focusing on brands that the consumer loves like the Bronco, and is addressing a roughly $2 billion warranty cost headwind. His goal is to create a new Ford that can grow profitability and generate sustainable free cash flow, and we believe the groundwork is being set to achieve this. Ford is also an underappreciated electric vehicle play as well through the Mustang Mach-E, and the electrification of the F-150 and Transit.

Conviction in our thesis was tested early on, as F saw its rating downgraded by analysts at Morgan Stanley the day after we first bought it as noted in our buy alert here. Even as the stock continued to move against us, we never wavered in our bullish views as evidenced by our purchase on January 4th in our Alert here when the stock traded down to about $8.50.

Going back to the action happening today, after gaining more than 9% last week, Ford has tacked on an additional 20% over the past three trading session. Do we think this mighty run can continue at this pace? Probably not, and that is why we are downgrading our rating to a TWO. We are also taking another look at our current $11 price target because the bullish sentiment on Ford is happening earlier than what we originally expected.

If you are a shorter-term gamer, we think you could look to take profits here. But longer term, we want to hold onto this one because Ford's turnaround is still in its very early innings and we believe it will be a multi-year story as Farley fixes up the company and electric vehicles rapidly gain in adoption.