Ford (F) stock surged on Wednesday after Morgan Stanley said Ford’s new energy business could be a winner for the automaker, citing a significant competitive advantage in battery tech.
Morgan Stanley’s Andrew Percoco wrote in a note published late Tuesday that Ford’s $2 billion battery storage bet, announced late last year alongside a $20 billion writedown of its electric vehicle assets, could put a dent in those big losses.
The main thrust comes from Ford’s deal with Chinese battery maker Contemporary Amperex Technology (CATL) (3750.HK).
“We believe Ford’s relationship with CATL is an under-appreciated strategic competitive advantage for its Energy Storage business [ESS],” the analysts wrote, calling Ford one of the few “semi-vertically integrated domestic ESS suppliers” with access to best-in-class lithium iron phosphate (LFP) technology.
Percoco argued that the ESS business could be worth as much as $10 billion on its own. Ford stock jumped 14% in midday trade a day after the note’s release.
Morgan Stanley pegs Ford Energy’s $10 billion of enterprise value at a 17.5x multiple on roughly $588 million of EBIT (earnings before interest and taxes) once the unit reaches 20 gigawatt-hours of annual production. The bull case could theoretically hit $31 billion, the bank said.
But there’s still some work to do with Ford Energy. Morgan Stanley projects a 25% gross margin only when the business scales and a negative EBIT in its first year in operation. Even in Percoco’s base case, the energy business would not flip to a positive EBIT contribution until 2028.
But Morgan Stanley still forecasts a 38% compound growth rate in domestic energy storage deployments through 2030, reaching 279 gigawatt-hours, driven largely by data centers fueled by AI demand.
Ford’s licensing agreement with CATL also plays a big role. By licensing CATL’s leading technology — LFP chemistry — and building the batteries in the US, Percoco argued that Ford will meet a requirement of 55% battery content from Foreign Entity of Concern (FEOC)-compliant suppliers, thus qualifying for the 30% Investment Tax Credit, which he called a “competitive advantage.”
If FEOC compliance holds and Ford lands even one hyperscaler client, the $10 billion mark could be conservative. Tesla Energy is already valued by the bank at $140 billion on a 30x 2028 EBIT multiple.
While Morgan Stanley and Percoco did not upgrade Ford’s Equal Weight rating or $14 price target, perhaps solid movement in the energy business and landing a major hyperscale client would push that forward.
