What happened
Shares of Ford Motor Company (F -1.92%) are up sharply today. The Blue Oval's shares were up 5.9% to $9.51 as of 11 a.m. EDT after an upgrade from Goldman Sachs and a report that China may soon cut a tax on new-vehicle purchases.
Ford is about to launch its all-new Focus in China. Chinese regulators are considering a tax cut that could give the new Focus a sales boost just as it arrives. Image source: Ford Motor Company.
So what
Two things sent Ford's stock higher on Monday morning.
- Goldman Sachs analyst David Tamberrino issued a note in which he upgraded Ford to a buy and boosted his price target for Ford's shares to $12. Tamberrino said that he expects Ford's earnings to begin improving in 2019 as a number of recently announced profit-boosting initiatives take hold. It was Tamberrino's first bullish note on Ford in more than two years; he had maintained a "hold" rating on Ford since July of 2016.
- Bloomberg reported that Chinese regulators are considering cutting a purchase tax in a bid to boost new-car sales, which fell 10% in the third quarter. The proposal is to cut a 10% tax on new-vehicle purchases to 5% for vehicles with engines no larger than 1.6 liters. Ford's sales in China have slipped sharply over the last year as the company's products have aged, but this cut could provide a welcome sales boost: Many of the vehicles in Ford's China lineup would qualify for the tax reduction, as would two new models set for introduction in China before the end of the year.
Monday's surge follows a good week for Ford, in which its stock rose 9.7% after its third-quarter earnings report reassured investors that the company's dividend and guidance are both stable for the time being.
Now what
Ford has recently made an effort to communicate more clearly about CEO Jim Hackett's plans to revamp parts of Ford's business in a bid to boost profitability. That effort has begun to pay off as analysts express cautious optimism -- but now Ford has to deliver.
