1 Surprising Reason I'm Bullish on Ford
Key Points
Ford is pivoting into battery energy storage systems serving data centers, industrial customers, and utilities.
The company is moving away from its electric vehicle strategy after losing billions.
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Ford Motor Company's (NYSE: F) electric vehicle (EV) ambitions fell far short of its goals. The EV division bled cash, leading to billions in losses and cancellations. It was one of the most costly failures in the history of the American car market. While many investors lost interest in Ford, I'm bullish on the stock, and not because of any new car or truck model.
Ford is doing something unusual, but quite innovative and opportunistic. The automaker decided that instead of scrapping its battery infrastructure entirely, it could be repurposed. Ford Energy was born from this idea and is a wholly owned subsidiary of Ford that will focus on battery energy storage systems for data centers, industrial customers, and utilities. That's right, Ford is entering the artificial intelligence (AI) infrastructure game, and it's in a fortuitous position to do so.
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Specifically, Ford will reoutfit its EV battery facility in Kentucky as part of this pivot, giving the factory new life rather than abandoning it. Power demand from data centers is a rapidly expanding opportunity. The battery storage market is projected to grow to $161 billion by 2034.
Ford also secured a five-year agreement with EDF Power Solutions North America. Ford will provide up to 4 gigawatt hours (GWh) of battery energy storage systems each year under the terms of the deal.
Image source: Ford.
Ford stock jumped on the news of the new energy strategy as investors cheered the initiative. Ford stock is now up more than 25% year to date as of this writing. Even with the recent stock bump, Ford remains reasonably priced. Its trailing P/E ratio is below 12.
While Ford's EV dreams were an unfortunate misstep, the timing for Ford Energy is a welcomed, lucrative off-ramp for the company and its shareholders. Ford could now unexpectedly make billions on AI infrastructure, which is why I'm bullish on the stock long-term.
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Catie Hogan 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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