Ford Motor Company (F) is a global automobile manufacturer and is among the most prominent in the United States. The firm has two brand names – Ford and Lincoln. It has a wide range of products, from trucks and SUVs to sports cars and electric vehicles.
2019 and 2020 have both been rough years for Ford. In 2020, a net loss of $1.28 billion was reported. However, in 2021, Ford has made a strong comeback, with its shares having gained over 120% year-to-date. I am bullish on Ford stock. (See Analysts' Top Stocks on TipRanks).
Interesting Business NewsFord announced its U.S. sales for October 2021, which was 175,918 vehicles, down 4% compared to the same period last year. However, it was still an improvement over September's total number of 156,614 vehicles. For a second straight month, Ford was the top-selling U.S. automaker. This was attributed to expanding inventories and new products. In October, Ford sold 14,062 electrified vehicles, up 195% over last year. It was also reported that Ford brand SUVs posted their best October retail sales in 21 years. The F-series and the Lincoln brand SUV sales were very strong.
I believe that Ford's new products can support strong sales in the coming quarters. In addition, Ford is not neglecting the electrification of its commercial vehicles such as the E-Transit, the electric version of its best-selling commercial van.
In late September 2021, Ford announced plans to build a Mega Campus in Tennessee and twin battery plants in Kentucky.
Ford and SK Innovation plan to invest $11.4 billion with the goals of creating 11,000 Jobs and powering the new lineup of Ford and Lincoln EVs. This deal with SK Innovation as a business partner shows Ford's commitment and strategic decision to invest in the future of electric vehicles.
Ford's Executive Chair, Bill Ford, said, "This is a transformative moment where Ford will lead America's transition to electric vehicles and usher in a new era of clean, carbon-neutral manufacturing."
He then continued, "With this investment and a spirit of innovation, we can achieve goals once thought mutually exclusive – protect our planet, build great electric vehicles Americans will love and contribute to our nation's prosperity."
Jim Farley, Ford President and CEO, said, "This is our moment – our biggest investment ever – to help build a better future for America."
Ford is also supporting the future of autonomous vehicles.
In mid-September 2021, Ford announced that "Ford Motor Company, Argo AI and Walmart are working together to launch an autonomous vehicle delivery service in Miami, Austin, Texas, and Washington, D.C. — Walmart's first multi-city autonomous delivery collaboration in the U.S. The last-mile delivery service will use Ford self-driving test vehicles equipped with the Argo AI Self-Driving System to deliver Walmart orders to customers."
Another key catalyst that can move the Ford stock now is the release of its third-quarter 2021 results, which was a strong earnings report.
Third-Quarter ResultsFor the third quarter of 2021, Ford reported better than expected EPS and revenue.
The adjusted EPS of 51 cents per share was higher than the adjusted 27 cents per share expected, and the automotive revenue of $33.21 billion was higher than the $32.54 billion expected. One of the most important factors on top of the strong earnings was that the automotive company increased its annual guidance for the second time in 2021.
Ford now expects adjusted earnings between $10.5 billion and $11.5 billion, higher than the previous estimate from between $9 billion and $10 billion.
The positive news should support Ford's stock price, which seems to neglect the global chips shortage completely. Not all things are rosy, though, for Ford.
High Debt Is a High RiskFord has a cash-to-debt ratio of 0.32 and a Debt-to-Equity ratio of 3.95.
Ford Motor has recognized that it must focus on strengthening its balance sheet, announcing plans to introduce a sustainable financing framework, and lowering its debt level. The company has decided to repurchase up to $5 billion of its higher-cost debt and reduce it.
ValuationFord stock is relatively undervalued. The price-to-sales ratio (TTM) for Ford, the Auto & Truck Manufacturers industry, and Consumer Discretionary Sector are 0.59, 3.79, and 2.98, respectively.
The price-to-book ratio also shows that F stock is relatively cheap. Its price-to-book figure of 2.18 is lower than the price-to-book ratios of 19.42 and 11.06 for its industry and sector, respectively.
Wall Steet’s TakeTurning to Wall Street, Ford has a Moderate Buy consensus rating, based on eight Buys, two Holds, and two Sells assigned in the past three months. The average Ford price target of $18.08 implies 6.9% downside potential.
Disclosure: At the time of publication, Stavros Georgiadis, CFA did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of Tipranks or its affiliates, and should be considered for informational purposes only. Tipranks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. Tipranks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by Tipranks or its affiliates. Past performance is not indicative of future results, prices or performance.
American automobile manufacturer Ford (F) is taking commendable steps in shifting from internal combustion engines (ICE) vehicles to electric vehicles (EV), to remain relevant in the changing automobile market. Earlier this year, the company upped its investment towards this effort to $30 billion, in order for 40% of its global vehicle volume to become all-electric by 2030.
The Mustang Mach-E is already gaining popularity among consumers. The upcoming lineup of EVs, including the F-150 Lightning Electric truck, Maverick hybrid pickup, and E-Transit also spark optimism.
Yet, Ford is not among the top names that come to our mind when we hear “EV.” Clearly, there are a few important hurdles coming in the way of Ford’s vision, and they deserve our attention.
Website Traffic TrendsFord’s website displays an online catalog of its portfolio of cars, upcoming cars, important news related to dividends, buybacks, launches, partnerships, etc. So, traffic to its website shows how much interest consumers have in the company and its developments.
Interestingly, TipRanks’ new Website Traffic tool, which sources its data from Semrush (SEMR), gives a fair idea of how many views Ford is getting on its website.
We saw that the visits to the company’s website by unique users decreased 11.9% sequentially in Q3. Moreover, when we compared the quarter-to-date figure with last year’s corresponding period, we saw a 5.27% decline in website visits.
Thus, we don’t see an encouraging trend here in terms of website visits, which strengthens our belief that Ford still has a long way to go when it comes to gaining the top position in the evolving auto industry.
Challenges to OvercomeFord has several challenges to overcome in the realm of EV. First, the massive spending budget for EVs, green vehicles, and self-driving cars is likely to strain near-term profit levels.
Secondly, the persisting chip shortage hounding the auto industry is unlikely to abate anytime soon. This is expected to remain a challenge that prevents Ford from realizing its full potential for some time. Moreover, high commodity costs and logistical challenges are expected to be an overhang on the company’s performance as a growing EV player.
The rising debt level is another concern. As of September 30, Ford’s automotive long-term debt (long-term debt for the company excluding its financial services unit, Ford Credit) was $23.77 billion, up from $22.63 billion recorded at the end of 2020. This is expected to be a hindrance to pursuing growth-driving initiatives.
Experts Weigh InOn November 11, Morgan Stanley analyst Adam Jonas reiterated a Sell rating on the stock, but raised the price target to $12 from $11.
Wall Street analyst consensus, on the other hand, has a cautiously optimistic stance towards Ford, with a Moderate Buy rating based on 8 Buys, 2 Holds, and 2 Sells. The average Ford price target of $18.08 indicates a downside potential of 8.96%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.