Every day, Wall Street analysts upgrade some stocks, downgrade others, and "initiate coverage" on a few more. But do these analysts even know what they're talking about? Today, we're taking one high-profile Wall Street pick and putting it under the microscope...

Ford (NYSE:F) stock got crushed after earnings -- down 8% in a day, and down even more since. Fool.com automotive specialist John Rosevear said "that's not bad" for investors, though.

What's more, just this morning, investment banker Morgan Stanley went a step farther to call it an unqualifiedly good thing -- and indeed, a "buying opportunity" for investors.

Here's what you need to know.

Close-up of car tire next to yellow line on road

Image source: Getty Images.

Ford in Q2...and beyond

Burdened by $1.2 billion in special restructuring charges incurred by its global "redesign," Ford's profits plummeted roughly 90% year over year in its fiscal Q2 earnings report. Sales declined, too, but only by a fraction of a percentage point.

Crucially, Ford's earnings -- once "adjusted" to back out those restructuring costs -- actually grew by $0.01 to $0.28 per share. And the automaker updated its guidance to predict that its adjusted earnings for the full year will range from $1.20 to $1.35 per share, which at the midpoint of guidance isn't too far off from the $1.30 per share in pro forma profit recorded in 2018.

Morgan Stanley wades in

In other words, things are looking pretty stable in the auto biz -- and that was surprising to Morgan Stanley. In today's note (covered on StreetInsider.com), the analyst says that it was expecting Ford's earnings to dwindle pretty significantly over the next few years, from $1.20 per share this year (i.e., the very low end of the company's new guidance) all the way down to just $0.75 per share by fiscal 2022.

Given the prospect of such a "40% drop" in profits over the next several years, Morgan Stanley was sitting on the sidelines with an equalweight rating on the stock. But now, with the new guidance in (and other observations, as we'll see in a moment), the analyst is changing its opinion and viewing the sell-off in Ford shares as a buying opportunity.

Morgan Stanley now recommends buying Ford stock, and gives it a $12 price target.

Profits and prospects

So why has Morgan Stanley reversed its opinion? The better guidance is certainly a key factor, but the reasons behind the improved expectations are also important.

As Morgan Stanley explains, savings from Ford's restructuring of its business were not built into the analyst's previous expectations. With those savings factored in, however, the analyst now sees the company's profits looking "largely stable ... at around $1.20 to $1.30 [per share] through the 2022 time horizon," reports StreetInsider.

Adding to the analyst's optimism are specific Ford actions to reposition its business for a future where more cars will be electric, more cars will be autonomous, and more cars will be...trucks.

Morgan Stanley cites Volkswagen's investment in Ford-controlled self-driving car venture Argo AI, and Ford's broader partnership with Volkswagen sharing self-driving car and battery technology to lower development costs between them, as advantages for Ford's business. And the analyst seems impressed more generally in the auto specialist's "emerging EV" plan and its decision to break out results from its "mobility" division separately (giving investors a clearer view into how that business is growing, and perhaps incentivizing investors to pay a bit more for Ford stock because of it).  

And while perhaps not all car buyers would agree, Morgan Stanley also applauds Ford's move to largely exit passenger car production and focus its efforts where the real money is in automobiles: trucks and sport utility vehicles.

The upshot for investors

Long story short, Morgan Stanley says "the reset of FY19 expectations following 2Q results and a 3-month low in the shares [make Ford stock] a buying opportunity."

Ford is making progress in revamping its business. That progress isn't going to cost the company as much as we once thought in terms of profitability (at least, not once you back out one-time items). Yet despite all this, investors have decided to sell off Ford shares to pretty cheap levels. Although the stock may not look particularly cheap at its current 17-times-trailing-earnings valuation, if profits hold up as well as this analyst is predicting, Ford shares could actually be costing closer to 7.5 times adjusted earnings this year...and next year, and the year after that, and in 2022 as well.

Seems to me that's a pretty good argument in favor of buying Ford today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.