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Ford Shares Surge on Energy Storage Outlook
Morgan Stanley Says CATL Deal Could Aid Automaker's Storage Business
Ford Motor Co. stock surged May 13 after Morgan Stanley issued a bullish call that the automaker’s energy storage business could soon make a deal with hyperscalers.
Shares climbed as much as 15% by 2:25 p.m. in New York, putting the stock on track for the biggest one-day gain since March 2020, and helping it turn positive for the year.
“We believe that there is a fairly high likelihood that Ford signs an Energy Storage System supply agreement with large commercial customers, and potentially hyperscalers, over the next few months,” Morgan Stanley analyst Andrew Percoco said.
The Dearborn, Mich.-based company’s deal with Chinese battery technology behemoth Contemporary Amperex Technology Co. is an “underappreciated strategic competitive advantage for its energy storage business,” the analyst wrote in a note to clients published late May 12.
Percoco estimated that Ford Energy could be worth $10 billion and also sees opportunity for the valuation to approach that of Tesla’s energy business as the company executes the capacity expansion plans and starts to build a firm order backlog.
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Ford is investing $1.5 billion this year to get into the energy storage business, which Chief Financial Officer Sherry House described on an April 29 earnings call with analysts as a “high return growth opportunity.”
The automaker is converting a Kentucky factory for batteries into a facility that builds large storage cells for data centers and utilities. It is also devoting part of a Michigan battery plant, opening this year, to producing smaller storage cells for the consumer market.
CEO Jim Farley said on the call that Ford’s new energy storage business is a “key element” to the company’s target of achieving an 8% earnings margin before interest and taxes by 2029, up from 3.6% last year. He said Ford’s shift to energy storage systems is being positively received by utilities and other customers.
“We’ve found a lot of inbounds and a lot of interest in Ford because they understand that we have the best tech, we have a lot of advantages financially,” Farley said on the investor call. “The company has deep relationships with a lot of these as vehicle customers, so they know us.”
According to Bloomberg Intelligence analyst Steve Man, expanding the energy segment is a “nice pivot to a higher-margin business.”
Impact to Ford’s business aside, the potential that the company could count massive technology firms as customers also boosted trader sentiment.
“It does show how much anything having to do with hyperscalers right now is getting a lot attention from investors,” said Matt Maley, chief market strategist at Miller Tabak + Co.
