Ford Motor (F) shares slumped lower in pre-market trading after analysts at UBS lowered their rating and price target on the carmaker, citing a sharp demand hit linked to the looming U.S. recession.
UBS analyst Patrick Hummel cut his rating on the stock to 'sell', from 'neutral', and took $3 off his price target to a new level of $10 per share ahead of the group's third quarter earnings later this month, citing the risk of U.S. recession and the impact of a slump in its European operations.
Ford said last week that September sales were solid, rising 16% from last year to 464,674 units, but cautioned late last month that gummed-up supply chains would clip its third quarter bottom line amid what it called "limits on availability of certain parts as well as higher payments made to suppliers to account for the effects of inflation."
Those limits are likely to boost inflation-related supplier costs by around $1 billion, Ford said, adding that as many as 45,000 vehicles that were missing certain components, thus ultimately delaying their sale until the final three months of the year, will remain in the carmaker's inventory.
That will mean a hit to both third quarter revenues, as well as its adjusted earnings, which it sees in the region of $1.4 billion to $1.7 billion. Ford will publish its third quarter earnings on October 26.
Hummel also cut his rating on General Motors GM to 'sell' from 'neutral', citing the risk that profits could "more than halve" next year amid rapidly accelerating demand destruction. His new GM price target was set at $38 per share, down $18 from his prior estimate.
"Despite a 40% negative stock performance YTD, the rapidly deteriorating top-down picture makes it unlikely that GM's strong EV story can drive shares higher with a 6-12 month view," Hummel said.
Ford shares were marked 7.4% lower in late-morning trading to change hands at $11.30 each, a move that would extend the stock's 2022 decline to around 46%.
General Motors shares, meanwhile, fell 45.7% to $31.70 each, taking the stock's year-to-date decline to around 46%.
