Why Ford Stock Reached a 3-Year High This Week
Key Points
Ford's new energy subsidiary announced its first customer agreement.
Ford is eyeing growth in Europe for its commercial vehicle business.
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Ford Motor (NYSE: F) shares continued to push higher this week, holding on to the momentum it gained after the company announced its new Ford Energy subsidiary on May 11. Last week, Ford announced its first sales agreement for Ford Energy.
That has led the stock to a new three-year high, gaining another 11.5% this week as of early Friday, according to data provided by S&P Global Market Intelligence.
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Two new growth paths
Ford Energy was created as a pivot from electric vehicle (EV) manufacturing to battery storage, leveraging some of the company's existing assets. After writing off a large amount previously invested in EV manufacturing, the company invested $2 billion to launch Ford Energy. Ford announced a new five-year agreement to supply its new battery energy storage systems (BESS) to global energy company EDF power solutions last week. Ford's containerized energy storage systems will help power large-scale energy storage initiatives throughout the United States.
Investors now have to figure out what return to expect from Ford's $2 billion investment. The stock's rerating has begun, though, driving the recent momentum in Ford shares. Ford Energy isn't the only catalyst to watch, either.
Ford has also announced a new push in Europe for its Ford Pro commercial business. Ford Pro will roll out new models and smart vehicle technology to support businesses of various sizes in Europe.
Ford's commercial business is its most profitable segment, so it's critical to maintain leadership in that area. Investors are betting that Ford Pro can continue to grow along with Ford's new energy business. That has the stock at multi-year highs this week.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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