Two Scenarios For Ford
As we pointed out in a previous article, Ford Motors (NASDAQ: F) has experienced a slowdown in growth in the North America trucks market, while the market has continued to experience faster growth. This poses a problem for Ford, given its heavy dependence on the trucks segment for profits.
Below, we look at two scenarios for the Detroit based auto maker. In one scenario, Ford grows at the same pace as it grew at in 2014 and 2015, i.e. 1.8% per year. Assuming a 3% growth rate for the overall market over the 2015-2020 period, we see that Ford’s market share could decline further by 90 basis points to 15.5%. Moreover, this would result in a 8.3% reduction in our target price estimate for Ford, assuming constant unit prices and direct and indirect expenditures for 2015.
In the other scenario, Ford recovers and starts to grow 1% faster than the market, as it did in the 2010-2013 period. With the same assumptions as above, we see that our target price for Ford could grow by close to 11%.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Ford Motor
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