Redburn Atlantic has initiated coverage on Ford Motor (NYSE:F) and Tesla (NASDAQ:TSLA) with Sell ratings. For Ford, Redburn set a 12-month price target of $10.00, citing a review of the automaker's cost structure, which indicates minimal improvement until a more robust electric vehicle (EV) platform is developed.
“We expect the group [Ford] to underperform its peers in this regard over the next two years,” wrote analysts in a note.
It's worth noting that in Q4 2023, Ford management projected that its agreement with the UAW would cost $8.8 billion over the contract's lifespan. The major components include gross wages, accelerated wage progression, and cost-of-living adjustments. This is expected to lead to a unit cost impact of $900 per vehicle by 2028, equivalent to 60-70 basis points of adjusted EBIT margin.
Ford aims to counterbalance this impact through enhanced productivity and reduced expenses. Redburn anticipates Ford improving its North American capacity utilization in 2024, aligning with industry trends.
Meanwhile, Tesla received a Sell rating with a 12-month price target of $170.00. Redburn identified a widening gap between expectations and the margin and free cash flow challenges faced by Tesla due to slowing near-term growth.
Redburn acknowledged that their call on Tesla is most at risk if the company introduces a compelling next-generation model with viable production within 18 months of announcement. However, they noted challenges in achieving this, citing new production technology, including battery cells, and the complexities of the Cybertruck ramp-up.
According to Redburn's estimates, Tesla's gross profit will continue to be fueled by its core Model Y for the next two years. Analysts anticipate a slight contribution boost from the Model 3 in 2024 following its refresh. The outlook includes a modest contribution from the Cybertruck in the late part of the decade, with peak sales volume expected to be below 200,000 in 2028.
Redburn's forecast assumes that Tesla will introduce a low-priced next-generation vehicle starting in late 2025. This vehicle is projected to reach more than 2 million units by the year 2030, playing a critical role in shaping Tesla's future financial performance.
Shares of F and TSLA are down 2.55% and 0.17% respectively in afternoon trading Wednesday.