Deutsche Bank Downgrades Ford (F) to Hold

Deutsche Bank downgraded Ford (NYSE: F) from Buy to Hold with a price target of $16 (unchanged). Analyst Rod Lache said he was more cautious on U.S. Auto stocks given prospective challenges.

"As we discuss in detail in a FITT report published today (“Pricing the Car of Tomorrow”), we believe that U.S. vehicle affordability is reaching an inflection point (affordability has been very favorable over the past 5-years, as illustrated by the fact that monthly payments have risen by just $7 despite the fact that the amount borrowed has risen by $2,647 since the beginning of 2008). The prospective regulatory cost burdens facing U.S. Automakers are unprecedented. Ford’s new 2015 F-150, which incorporates a number of advanced but costly powertrain, light-weighting, and safety technologies, represents one of the most prominent early examples of this forthcoming change," said Lache.

"We question whether consumers will pay the price for this content with $2-$3 gas, and in a rising rate environment (Ford’s product strategy, set 3-4 years ago, likely contemplated a somewhat different market dynamic vis à vis energy costs). At the very least, the combination of rising new car prices, falling used car prices, rising rates, and a strong USD vs. the Japanese Yen will likely perpetuate questions about the implications for ownership cycles, industry mix, pricing, and U.S. Automakers’ competitiveness (JPY has declined by 35% over the past 3-years; each 10% decline in the Yen reduces Japanese OEM costs by ~$400 per vehicle," continued the analyst.

"At the same time, U.S. Automakers face per vehicle regulatory cost inflation that could average ~54% of their current EBIT margin per unit). Auto stocks trade on confidence in earnings expectations, and we are cautious about the prospects for multiple expansion given this backdrop," he added.

For an analyst ratings summary and ratings history on Ford click here. For more ratings news on Ford click here.

Shares of Ford closed at $14.99 yesterday.

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