For the past three and a half years, Ford Motor has traded in a very narrow range, never going much above $15 per share and never too far below $10 per share.
But the debut of Ford Energy last month changed all of that, sending the stock soaring 47% in May, peaking at $17.44 to close out the month. Since then, the stock has given up some of those gains, but it is still trading at $14.80 at last check on Monday, June 15.
Ford shares caught fire after the company debuted Ford Energy, the battery storage initiative the company has been quietly working on for about a year. The new partnership with EDF will see the company deliver up to 20GWh of battery energy storage systems for utility-scale and data center customers starting in 2028.
The agreement with EDF combines “industrial-scale manufacturing discipline with full lifecycle accountability,” with the venture’s flagship product being a 20-foot containerized 5.45 MWh system using 512 Ah LFP prismatic cells with liquid-cooled thermal management called the Ford Energy DC Block.
Analysts at Morningstar say investors are now treating Ford as a potential beneficiary of “the growing energy needs of data centers used for artificial intelligence.”
But they are also asking whether the AI excitement is overblown and have questions about whether the new energy division can become a profitable business.
Is Ford an AI play now?
Whether Ford Energy makes the Blue Oval a true AI play is up for debate, but investors seem to be treating it as such.
Some of the gains may partly be because Ford is pivoting away from its money-losing EVs to build out its battery storage capacity. But the real question for Morningstar analysts is whether the new division can become a profitable business, “or if AI excitement is getting ahead of the company’s ability to execute.”
“Ford Energy was announced by the company late last year, and the market really didn’t do anything,” Morningstar analyst David Whiston said in a note viewed by TheStreet. “All of a sudden, the market decided to view Ford as a data center play.”
Ford has lost more than $16 billion from its EV segment since 2022, and recently announced it is writing down more than $19 billion in losses from the division as low demand and the fact that EVs are more expensive to build have eaten into the company’s bottom line.
“With EV interest falling off, [Ford] reallocated some of the capacity to make the Ford Energy business,” Whiston says. “The energy business should be accretive for them eventually, but it’s going to take quite a while for it to scale up.”
And it’s not just EVs Ford is struggling with, according to Morningstar. It is also seeing higher prices for aluminum and other raw materials. So this pivot is coming at a welcome time as investors continue to question its flagship business.
“[Ford] just needs to keep having really good news on earnings day and stop the pattern of one step forward, one step back,” Whiston said.
Morningstar landed on a high uncertainty rating for Ford “because of the cyclical nature of the automotive industry and the company’s ongoing execution challenges.” The firm maintained a $19 per share rating on the stock, though, as “the company has begun to handle its costs and warranty expenses better.
Morgan Stanley says Ford’s battery storage business isn’t fully priced into the stock
Morgan Stanley analysts led by Andrew Percoco are bullish on Ford Energy, but they say the stock’s May increase represents only part of the value the new battery storage and AI infrastructure play brings to the company.
“Energy storage systems are becoming a critical part of the US power market, as demand becomes more volatile and peak-heavy, offering modularity, faster deployment timelines, rapid response to sudden load ramps, and the ability to smooth peaks without requiring the overbuild of generation or transmission infrastructure,” Percoco said in a note viewed by TheStreet.
The firm expects U.S. energy storage system deployments to grow at a 38% compound annual rate over the next five years, reaching more than 279 GWh by 2030, with 169 GWh demand from data centers.
The sector is so hot, MS analysts believe more companies, like Ford rival General Motors, will dedicate technology and capacity to the segment “given subdued EV demand.”
But even with the more than 30% increase and the threat that GM will soon enter the same business, Morgan Stanley says investors are still undervaluing Ford Energy.
“We believe F is currently trading with 20-25 GWh of run-rate ESS demand priced into the stock. While this may seem like a lot, we believe the stock has further room to run if the company continues to add high-quality customers to its ESS backlog, which could bring additional capacity expansion into play (although we do not expect the company to formally announce any capacity expansion anytime soon),” Percoco said.