By Al Root
Ford Motor stock has soared on hopes that artificial intelligence could boost growth at the nearly 123-year-old auto maker.
Growth is great, but the plan relies on the government.
In early May, Ford announced plans to use excess EV battery capacity for utility-scale energy storage, much like what Tesla does. The new business is called Ford Energy. Investors were thrilled by the idea. Coming into Wednesday trading, Ford stock was up about 35% since the announcement.
The move added about $17 billion in market value for a business that Wall Street estimates will generate roughly $500 million in operating profit by the end of the decade. That's a 34 times multiple.
Ford, before the announcement, traded for about four times estimated 2030 operating profit. Car companies don't get big multiples. Investors are used to low growth and volatile earnings.
Investors are clearly pleased, believing that Ford will capitalize on growing power demand, mainly because of the boom in AI data center building.
Nothing prevents other auto makers with excess battery capacity due to overly optimistic EV forecasts from doing something similar, though. Ford has one advantage there. It licenses technology from the largest battery maker in the world, Contemporary Amperex Technology Co. Ltd, or CATL. That means Ford batteries, made in America, are compliant with Foreign Entity of Concern lists.
Making EVs or battery storage products from imported Chinese batteries can disqualify them from certain government tax breaks.
"Starting this year, developers building energy storage system [ESS] projects are required to source at least 55% of the battery content from Foreign Entity of Concern (FEOC) compliant suppliers in order to qualify for the 30% Investment Tax Credit," points out Morgan Stanley analyst Andrew Percoco. "Ford is emerging as one of the few FEOC-compliant domestic, [which] we believe is an underappreciated competitive advantage others cannot easily replicate under current regulation."
He rates shares Hold and has a $17 price target, noting that the market is putting a high multiple on potential Ford Energy earnings. Still, if Ford signs up new customers for Ford Energy, he could see the stock trending toward his $21 bull case target.
Ford stock was down 1.5% in midday trading on Tuesday at $15.88, while the S&P 500 and Dow Jones Industrial Average were down 0.5% and 0.8%, respectively.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 03, 2026 11:20 ET (15:20 GMT)
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