In a fresh blow to Ford Motor Company, shares tumbled on Monday following a significant downgrade from analysts at Jefferies, who raised red flags regarding the automaker's escalating inventory issues.

Jefferies, a prominent financial services company, has reduced its rating on Ford from "hold" to "underperform," slashing the price target from $12 to a disappointing $9. This new target sits below the average estimates offered by other analysts, who are currently predicting a price above $11. As a reaction to the news, Ford's stock dipped nearly 4% in trading.

In their client notes, Jefferies attributed the downgrade to "broad concerns" surrounding several factors, including an overwhelming inventory backlog, potential strategic challenges regarding Ford's operations in Europe, and an unsettling discrepancy between warranty provisions and expected cash outflows.

Ford Struggles with Excess Inventory—What This Means for Investors!

Jefferies analysts noted a critical issue for the automaker: the need to 'de-stock' its ballooning inventory, which has reached an alarming average of 96 days, despite solid sales. This is a stark signal to investors that the company's ability to efficiently manage stock levels is compromising its financial stability.

Further complicating matters, the analysts characterized Ford's balance sheet as "robust rather than strong," predicting that upcoming potential claims related to restructuring and warranties could put severe strain on cash availability for shareholders. If Ford aims to uphold a conservative financial approach, it may be detrimental for dividends and stock buybacks moving forward.

While Jefferies maintained a "hold" rating for rival General Motors (GM) and a price target of $52, GM has seen a more favorable outlook, with its shares climbing roughly 40% year-to-date. In contrast, Ford's stock has suffered a stark decline, down about 18% since the start of the year.

Investors and Ford fans alike will be keenly watching how the automotive giant navigates these turbulent waters, especially in light of the anticipated easing of emissions standards under the new administration, which could provide a reprieve. Stay tuned for updates as this story develops—they could have major implications for Ford’s future!