Ford Motor may be primed to become a strong play on buzzy market trends as it ramps up its new battery energy storage systems, or BESS, business, according to a few shops on the Street. On Monday, the automobile company said it would supply up to 20 gigawatt-hours of storage capacity to renewable power developer EDF Power Solutions over five years. The agreement marks the first major deal closed by Ford Energy, or the carmaker's BESS unit that debuted last week, according to a company statement dated May 11. "Today's announcement reinforces Ford's positioning as a domestic supplier of BESS… this [could be] the first of potentially several large customer announcements this year," Morgan Stanley analyst Andrew Percoco said Monday in a note to clients. Morgan Stanley has an equal-weight rating on Ford. It also has a $14 price target on shares, implying roughly 4% upside from Friday's close. Ford Energy aims to capitalize on a boom in artificial intelligence and other buzzy investing trends that require a lot of energy and the infrastructure that supports it. Under its first deal, the business will provide EDF access to as much as 4 GWh of DC Block battery energy storage ​systems per year. Morgan Stanley's Percoco added that shares could eventually rally to $21, "as additional contracts are announced… [and] as the market begins placing a higher multiple on Ford's Energy business." Meme-like run? It doesn't matter Despite the seemingly bullish development, Ford stock edged down 1% on Monday, continuing a pullback from its massive meme-like rally last week. F 1D mountain Ford stock edged down about 1% on Monday. Beginning last Wednesday, shares surged roughly 21% over a period of two days, as investors showed excitement toward Ford's move to gain exposure to more viral parts of the market through its energy vertical. However, the stock ultimately gave up some of those gains on Friday. Recent volatility in the stock seems to have done little to dampen the Street's outlook on Ford, however. "The energy announcement in particular is likely to be well received given the increased focus on the potential for that business," UBS analyst Joseph Spak said Monday in a note to clients. The analyst has a buy rating on Ford and a $14 price target on shares. "We like Ford's BESS opportunity…given their [partnership with Chinese battery company Contemporary Amperex Technology Co., or CATL] (which others are unlikely to be able to get now)," Spak said. He added that the company had other tailwinds that could help it generate cost advantages, including UBS's view that Ford's product is likely compliant with a regulation that restricts the use of battery materials or components sourced from China, Russia, Iran or North Korea. In a note dated May 14, Barclays analyst Dan Levy noted that the stock's ability to "occasionally tap into the 'meme spirits' of the market" doesn't negate the fact that the company boasts strong underlying fundamentals that should boost its stock over the long term. "While this move arguably wasn't rational on the surface (with much still for Ford to prove), in the context of the market's excitement over AI/data centers, the move makes sense," Levy wrote. Barclays has an equal weight rating on Ford. It also has a $13 price target on shares, implying about 3% downside from Friday's close. As of writing time, analysts are largely lukewarm on Ford. Of the 24 analysts covering the carmaker, 17 have a hold rating on the stock, while just five have a buy or strong buy rating on it, LSEG data shows. Correction: Andrew Percoco is an analyst with Morgan Stanley. An earlier version misstated the name of his firm.
