Analyst Says Ford Overvalued

Credit Suisse analyst said even if Ford's market share remains steady and U.S. demand for new cars recovers by 2011, its stock still isn't an attractive buy.

NEW YORK (AP) -- An analyst said Friday that even if Ford Motor Co.'s market share remains steady and U.S. demand for new cars recovers by 2011, the automaker's stock still isn't an attractive buy given a dramatic run-up in share price since early March.

However, Credit Suisse analyst Christopher Ceraso tripled his target price on the stock to $3. He maintained a "Neutral" rating.

Ford's domestic market share was 14.5 percent in March, and Ford "has held up relatively well" compared to General Motors Corp. and Chrysler LLC, which are both limping along on more than $17 billion in government money and may need more.

Ford had said it did not need the money.

While investors have bet on Ford due to its debt restructuring earlier this month, a hope that U.S. car sales have bottomed and the looming reorganizations at Chrysler and GM, Ceraso said "for the stock to be interesting from this level" Ford must substantially grow its share of the auto market.

Ceraso's price target presumes a U.S. auto market recovery to 13.8 million vehicles sold in 2011. So far this year, auto sales are running at an annual sales pace of under 10 million vehicles, he said.

The longer-term trend for all three domestic automakers is down, however, having gone from about 70 percent of the U.S. market in January 1997 to less than half today, Ceraso said.

He still sees a loss for Ford in 2011.

Ford's debt restructuring earlier this month shrunk its debt by 38 percent, which means millions off its interest costs. It retired nearly $9.9 billion in securities in exchange for cash and shares.

GM and Chrysler, meanwhile, have looming restructuring deadlines with the government. They will get more money and be able to stay out of bankruptcy court if they can renegotiate terms with their bondholders and unions. Additionally, the government said Chrysler, which it doesn't think can survive independently, must link up with Italian auto maker Fiat Group SpA by its deadline of April 30.

But Ceraso said a liquidation is still possible at Chrysler, while there will likely be, at minimum, a downsizing at GM.

Ford reports first-quarter earnings on April 27. Investors should keep an eye on the amount of cash the company will have burned through, Ceraso said. He sees about $4 billion in operating cash burn for the quarter, and $7 billion to $8 billion for the year, which would not be enough to necessitate government aid.

Ford shares closed Thursday's trading at $4.16. They have more than doubled in value since early March.

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