Flexible EV Platform And Digital Services Will Revolutionize Mobility

Key Takeaways

• Accelerated growth in high-margin software, services, and EV innovation enhances Ford's profit stability, market position, and capacity for sustained margin expansion.
  
• Strong cost efficiencies, quality improvements, and robust financial flexibility support ongoing investment in autonomy, digital capabilities, and long-term shareholder returns.
  
• Structural industry shifts, legacy cost burdens, delays in EV adoption, intensifying competition, and supply chain vulnerabilities all create persistent challenges to Ford's profitability and growth.

Catalysts

Develops, delivers, and services Ford trucks, sport utility vehicles, commercial vans and cars, and Lincoln luxury vehicles worldwide.

• Analyst consensus highlights Ford Pro's shift to high-margin, recurring software and services revenue, but the scale and speed at which subscriptions are growing-24% year-over-year in paid fleet subscriptions and revenue per user doubling-suggest Ford Pro is on track to drive a structural step-change in overall company profit stability and net margins well beyond current expectations.
  
• While analysts broadly acknowledge cost reductions and quality improvements, Ford is actually accelerating past initial targets, with manufacturing and parts cost efficiencies rolling in ahead of schedule, and early signs point to warranty coverage and recall costs for newer vehicles declining by at least 50% versus previous model years, potentially unlocking margin expansion and earnings upside faster than consensus predicts.
  
• Ford's next-generation, flexible electric vehicle platform-described as a Model T moment-positions the company to leapfrog legacy and new entrants as global demand for affordable, efficient, and technologically advanced EVs surges, strengthening Ford's ability to capture market share and achieve cost leadership as electrification accelerates globally, directly benefitting future revenue and gross margins.
  
• The growing durability of Ford's business, underpinned by a robust balance sheet with over $28 billion in cash and $46 billion in liquidity, allows for continuous investment in innovation and growth initiatives (including emerging markets and battery supply chains), supporting long-term earnings resilience and the capacity for outsized shareholder returns through buybacks and dividends, even during macroeconomic downturns.
  
• Ford is uniquely positioned to capitalize on the rapid evolution of integrated vehicle software, data monetization, and autonomy-with in-house engineering teams advancing Level 2+ and Level 3 autonomous systems and Ford Pro poised to become an indispensable partner for managing and servicing autonomous and electrified commercial fleets-unlocking new streams of high-margin, recurring revenue and reinforcing Ford's competitive moat in the automotive sector's digital future.

Ford Motor Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Ford Motor compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Ford Motor's revenue will grow by 2.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.7% today to 4.8% in 3 years time.
• The bullish analysts expect earnings to reach $9.4 billion (and earnings per share of $2.33) by about August 2028, up from $3.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 8.6x on those 2028 earnings, down from 14.0x today. This future PE is lower than the current PE for the GB Auto industry at 18.2x.
• Analysts expect the number of shares outstanding to grow by 0.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Ford Motor Future Earnings Per Share Growth

Risks

• Ford faces long-term risk from the global shift toward urbanization and shared mobility, which may reduce individual car ownership and limit Ford's total addressable market, presenting a structural drag on future revenue growth.
  
• The company continues to carry heavy legacy costs from unionized labor and pension obligations, which constrain its ability to flex costs in downturns and result in persistently lower net margins and weaker earnings compared to peers.
  
• Despite pockets of strength, Ford's electric vehicle transition has been delayed and at times scaled back, which risks further market share loss to more aggressive EV competitors and could weigh on future revenue growth and profitability.
  
• Global overcapacity and intensifying competition-particularly from aggressive non-traditional entrants like Tesla, Chinese EV manufacturers, and tech companies-threaten to erode Ford's pricing power and compress margins, undermining long-term returns on invested capital and overall earnings potential.
  
• Continued supply chain risks, especially around critical EV components like rare earth minerals and semiconductors, expose Ford to input cost inflation, production delays, and unpredictable warranty-related expenses, which increase volatility in future earnings and could pressure both revenue and profitability.

Valuation

• The assumed bullish price target for Ford Motor is $14.32, which represents two standard deviations above the consensus price target of $10.74. This valuation is based on what can be assumed as the expectations of Ford Motor's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $8.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $197.6 billion, earnings will come to $9.4 billion, and it would be trading on a PE ratio of 8.6x, assuming you use a discount rate of 12.3%.
  
• Given the current share price of $11.06, the bullish analyst price target of $14.32 is 22.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.