Ford Stock Is Up. The Scary News Is Actually a ‘Bold Action.’

The cab is lowered onto the frame of a Ford F-150 Lightning truck at the company’s Rouge Electric Vehicle Center in Dearborn, Mich. (Jeff Kowalsky / AFP / Getty Images)

Key Points

• Ford Motor is shifting from all-electric cars to hybrids, incurring $19.5 billion in charges.
• Ford stock rose 1% despite the charges, driven by updated guidance implying $1.3 billion in fourth-quarter operating profit.
• Analysts view Ford’s strategic shift as a bold move. Management expects the Model e division to achieve profitability by 2029.

The headline certainly looked alarming. Fortunately, the stock market is forward-looking.

Monday evening, Ford Motor announced a major pivot away from all-electric cars and back toward hybrids, saying it was “following the customer.” Gone will be the all-electric F-150 truck. More hybrids and “extended range electric vehicles,” which are powered by batteries and have a gasoline generator on board to add range, are on the way.

The changes necessitate $19.5 billion in charges. Included in that amount are noncash asset write-downs, reflecting cash spent that won’t yield a return, and $5.5 billion in cash yet to be spent.

Despite the big numbers, Ford stock traded as high as $13.99 on Tuesday, and closed at $13.67, up 0.2%, while the S&P 500 and Dow Jones Industrial Average dropped 0.2% and 0.6%, respectively.

Better-than-expected financial guidance helped to lift the stock. Updated forecasts issued along with news of the charges imply about $1.3 billion in fourth-quarter operating profit. Wall Street was projecting less than $700 million, according to FactSet.

UBS analyst Joseph Spak called the strategic shift a “bold action” in a Monday report.

“We expect stock could react favorably to the guidance raise and [long-term] Model e commentary, but there is a lot to digest and many moving pieces,” he wrote, adding the write-downs remove years of future losses. “However, Ford is not turning away from EVs….just using new platforms.”

Model e is Ford’s EV division. Ford projects the business will be profitable by 2029.

Spak rates Ford stock Hold and has a $12.50 price target for shares. Citi analyst Mike Ward rates shares Hold, too. His price target for Ford stock is $1 higher, at $13.50.

“Not my Father’s Detroit,” wrote Ward. “The industry has become more proactive than in the past. Previous generations would have debated a decision like this for years, allowing the cloud to remain, and it would have looked for ways to pressure suppliers and dealers to pay for unplanned errors.”

He praised the decision while noting the headwind to cash flow in 2026 and 2027.

“When life gives you lemons…at least try to make lemonade,” Ward wrote. For now, investors agree with that sentiment.

Write to Al Root at allen.root@dowjones.com