Ford Motor Co. stock surged on Wednesday after Morgan Stanley issued a bullish call, predicting that the automaker's energy storage business could soon secure deals with hyperscalers. Shares climbed as much as 15% by 2:25 p.m. in New York, marking the biggest one-day gain since March 2020 and turning the stock positive for the year.
Hyperscaler Deals on the Horizon
Morgan Stanley analyst Andrew Percoco stated, "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." He highlighted Ford's partnership with Chinese battery technology company Contemporary Amperex Technology Co. Ltd. (CATL) as an "underappreciated strategic competitive advantage" for its energy storage business.
Ford Energy Valuation Potential
Percoco estimated that Ford Energy could be worth US$10 billion, with potential to approach the valuation of Tesla's energy business as the company expands capacity and builds a firm order backlog. Ford is investing US$1.5 billion this year to enter the energy storage market, which Chief Financial Officer Sherry House described as a "high return growth opportunity" during an April 29 earnings call.
The automaker is converting a Kentucky battery factory into a facility for large storage cells used by data centres and utilities, while a Michigan battery plant opening this year will produce smaller storage cells for consumers. Chief Executive Jim Farley said the energy storage business is a "key element" to achieving an 8% earnings margin before interest and taxes by 2029, up from 3.6% last year.
Positive Reception from Customers
Farley noted that 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," he said. "The company has deep relationships with a lot of these as vehicle customers, so they know us."
Bloomberg Intelligence analyst Steve Man commented that expanding the energy segment is a "nice pivot to a higher margin business." The potential of counting massive technology firms as customers also boosted trader sentiment. Matt Maley, chief market strategist at Miller Tabak + Co., noted, "It does show how much anything having to do with hyperscalers right now is getting a lot attention from investors."
