UPDATE: Citi Downgrades Ford (F) to Neutral; Analyst Prefers GM (GM)

(Updated - January 5, 2015 9:25 AM EST)

Citi downgraded Ford (NYSE: F) from Buy to Neutral. Analyst Itay Michaeli thinks General Motors (NYSE: GM) will trade at a premium to Ford by the end of 2015 given Ford's Yen exposure.

"In the context of our bullish stance on the U.S. cycle, in 2015 automaker stocks will increasingly be distinguished by exposures to the powerful “arm wrestle” unfolding between gas prices (good) and the Yen (bad). Naturally investors will want to prefer companies that can benefit most from lower gas while avoiding those most exposed to the Yen. On gas prices, our prior analysis showed that GM edges Ford in being able to absorb higher truck demand," said Michaeli. "On the Yen, commonly used data has suggested that GM is bigger than F in vehicles exposed to Japan. But is it?"

"We are introducing Citi Yen Maps, a proprietary look at car segment retail sales in each individual state. Whereas commonly used data suggests that GM’s share exceeds Ford’s by ~200bp in vehicles most exposed to Japan, ours concludes that Ford’s actually exceeds GM’s by 60-70bp in retail. Our edge? We know who is actually competing with whom and where—~70% of select J3 sales concentrate in 14 states where Ford happens to be bigger. Want to see Detroit’s exposure purely to Japanese imports? We have that too, and F is bigger," continued the analyst.

"Ourr analysis doesn’t turn a Ford bull into a bear but does question the valuation premium to GM—we now believe GM will command a premium to Ford by the end of 2015. With F stock recovering off lows, risk/reward balances and we move to the sidelines (tgt. unchanged)," 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 $15.36 yesterday.

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