Piper Sandler has reaffirmed an Overweight rating on Ford Motor Company and left its price target at $16.00, a level that implies roughly 18% upside from the stock's prevailing price of $13.61. The research note singles out improvements in warranty costs as a primary potential catalyst for 2026.
The bank highlights a persistent history of quality-related expenses at Ford. In its analysis, Ford has outspent General Motors on warranty costs as a percentage of vehicle price in 24 of the last 27 quarters. That pattern, Piper Sandler argues, has been a headwind to margins and likely contributes to Ford's weak gross profit margin, recorded at 7.55% in InvestingPro data cited by the firm.
Under a scenario in which Ford meaningfully reduces warranty spending in 2026, Piper Sandler models up to $2.8 billion of incremental EBIT compared with 2025. On a per-share basis, the firm translates that earnings power into a $0.54 year-over-year boost to EPS.
The research note also notes valuation metrics that the firm views as attractive today. Ford trades at a price-to-earnings ratio of 11.64 and shows a free cash flow yield of 22%, figures that factor into Piper Sandler's positive stance.
Operationally, Piper Sandler expects any improvement in warranty expense to pair with continued strength in Ford Pro, which the firm identifies as the company's highest-margin segment and one with exposure to the housing market. Separately, the firm anticipates that Ford's electric vehicle losses will narrow year-over-year, driven by lower regulatory credit spending and reductions in structural costs connected to prior write-downs. Combining these elements, Piper Sandler calls Ford its "favorite idea in 2026."
At the same time, there are several contemporaneous developments that add complexity to Ford's near-term outlook. The National Highway Traffic Safety Administration reports that Ford is recalling 116,672 vehicles in the United States because of an electrical issue that could increase the risk of fire. According to that notice, an electrical short circuit in the affected vehicles could pose a fire hazard.
Separately, Ford is reported to be in discussions with Chinese automaker BYD about a potential arrangement to purchase batteries for some hybrid models. Details remain under negotiation. One option under consideration would see Ford importing BYD batteries to manufacturing facilities located outside the United States.
The BYD talks have attracted political and industry commentary. Ontario Premier Doug Ford criticized a new trade agreement between Canada and China that reduces tariffs on Chinese electric vehicles, arguing the deal could harm Canadian workers. Peter Navarro, former director of the Office of Trade and Manufacturing Policy, has publicly questioned the strategy of discussing battery sourcing with a Chinese competitor.
On the analyst front, UBS's Joseph Spak has kept a Neutral rating on Ford with a $12.50 price target. Spak's view follows Ford's announcement of three new technology initiatives, which include an AI assistant and a next-generation advanced driver assistance systems platform.
Taken together, the Piper Sandler outlook rests on a specific operational inflection - improved product quality and lower warranty costs - that could unlock several hundred million dollars in operating profit and material per-share gains in 2026. That upside is balanced against active recalls, ongoing discussions about battery sourcing, and differing views among sell-side analysts on near-term valuation and technology execution.
Investors and market participants will likely monitor warranty trends, Ford Pro margin performance, EV loss trajectory, and any concrete outcomes from battery discussions with BYD as indicators of whether the 2026 scenario Piper Sandler outlines is attainable.