"Ford is back," with a solid bottom line and balance sheet, but shares are approaching cyclical highs and it's too early to rate the stock like an electric vehicle maker, warns one analyst.

"We think it is premature to re-rate legacy OEMs [original equipment manufacturers] for their EV progress since earnings remain mostly driven by cyclical shortages, returns remain within historical norms, and the EV transition is largely a zero-sum-game initially," wrote Jefferies analyst Philippe Houchois in a note to investors. 

Houochois downgraded Ford to Hold from Buy, yet increased his price target on the stock to $25 from $20.

The analyst noted the speed at which the company has improved its bottom line and advanced its EV strategy. The stock has been on a tear up until this week, reaching a 52-week high recently. 

This content is not available due to your privacy preferences.Update your settings here to see it.

"It took so long and happened so fast. Ford and its shares are in good shape and in good hands," wrote the analyst.

"The group has replaced, revived or re-invented all key product franchises, leapfrogging EV early movers in the U.S. and in Europe (100% electric-targeted by 2030)," he wrote. 

The analyst wrote, "Ford is back, with strong earnings and a repaired balance sheet. Shares have also re-rated on recovered earnings that now approach cyclical highs. All that leaves limited scope for positive surprises although the stake in non-core Rivian, expected IPO of Argo AI, and the return of dividends provide strong support," wrote Houchois.

The all-electric F-150 Lightning from Ford is displayed at the Los Angeles Auto Show in Los Angeles, California on November 18, 2021. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

The Dearborn, Michigan–based company has surpassed automaker GM (GM) and EV startup Rivian (RIVN) in market capitalization. Earlier this week Ford said its fourth-quarter results would include an $8.2 billion gain due to its investment in Rivian. The company is also an investor in artificial intelligence startup Argo AI. 

Shares closed at their highest level in 21 years on January, after the automaker announced it would nearly double production capacity to meet demand for its upcoming F-150 Lightning electric pickup truck.

Story continues

Last year, Ford's stock jumped more than 135%. 

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Instagram, YouTube, Facebook, Flipboard, and LinkedIn

(305) 707 0888