Ford (NYSE: F) made a big move in May when it announced plans to launch an energy storage business called Ford Energy.
Ford stock soared 47% last month mostly on the news of the company’s new endeavor, and investors are likely excited by analysts’ predictions that the new business could generate $500 million in operating profit for Ford by 2030.
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With this new entry storage business about to launch, is now the time to buy Ford stock? Here’s why investors may want to hold off on making that move.
Ford is tapping into increasing energy usage from AI
Artificial intelligence (AI) is fueling rising demand for energy storage, and Barclays analyst Dan Levy recently said that Ford is a “hidden data center beneficiary.”
Automakers invested tens of billions of dollars over the past several years to convert factories for electric vehicle (EV) production. The problem, as it turned out, is that rising EV material costs, lower-than-expected demand, and tariffs have caused many companies to abandon their most ambitious EV goals. The federal government eliminating EV tax credits didn’t help either.
The result is that Ford’s losses from its EV division add up to $16 billion over the past few years — and management says it will continue losing money on EVs for the next three years.
Which is why Ford is trying to recoup some of its battery and EV tech investments.
Its announcement last month that it would shift some of its EV battery factories to make battery storage excited investors. The goal is for Ford to produce up to 20 gigawatts of capacity over the next five years, with battery deliveries starting in 2028.
Ford CEO Jim Farley told the Detroit Free Press last month that the company is already seeing “tremendous interest from customers,” adding, “[W]e’re off to a good start both on the supply side, building the plants, building the cells, getting the machines up and running, as well as the demand creation side.”
Ford will invest $2 billion in the business to get things up and running.
Analysts at Morgan Stanley said Ford Energy could generate $500 million in operating profit by 2030. The analysts also believe Ford could sign supply agreements with commercial customers in the coming months.
That may be a drop in the bucket compared to Ford’s earnings before interest and taxes (EBIT) of nearly $6.8 billion last year. Still, investors are excited to see the company thinking outside of the traditional automotive box and embracing new revenue opportunities.
