Ford Motor (F) stock, which zoomed past peers this year, has hit a roadblock. The spread of the Delta variant of the coronavirus, and production cuts amid chip shortages, weighed on the shares of automakers, including Ford. Though its transformation initiatives and favorable product mix augur well for growth, I maintain a Neutral view on Ford stock, solely due to the uncertainty surrounding chip availability.
While I remain on the sidelines, TipRanks’ Stock Investors tool suggests that investors currently have a Very Negative stance on Ford Motor, with 2.8% of investors who hold portfolios on TipRanks decreasing their exposure in the last 30 days. Notably, Ford Motor stock has receded nearly 24% since hitting its 52-week high of $16.45 on June 4.
Nevertheless, it’s up about 47% this year, outpacing peers, including General Motors (GM) and Tesla (TSLA), by a wide margin. (See Ford Motor stock charts on TipRanks)
While Tesla stock trades in the red on a year-to-date basis, General Motors stock is up about 17% during the same period. Ford’s outperformance reflects the redesign of its portfolio, better product mix, transformation initiatives, and solid capital allocation strategy.
Coming back to the semiconductor situation and commodity headwinds, Ford, like other automakers, could lose a significant portion of its planned production amid supply constraints. Ford’s CFO John Lawler said during the Q2 conference call that he sees the “chip issue running this year” and “bleeding into the first part of next year.”
The company highlighted in its SEC filing that it is “highly dependent on its suppliers,” and a “shortage of key components,” such as semiconductors, can disrupt its production.
However, management expects to navigate the chip issue through its emphasis on its build-to-order sales bank, investments in electrification, and strong product line-up. Further, Ford’s CEO Jim Farley said that “we’re not slowing down our modernization because of the chip situation; in fact, we’re doing the opposite.”
Meanwhile, Ford’s focus on optimizing its revenue and profits through a favorable mix and lower incentives lowers pressure on its bottom line amid a decline in production.
Ford stock commands a Moderate Buy consensus rating based on 7 Buys, 5 Holds, and 1 Sell. The average Ford Motor price target of $16.10 implies 28.1% upside potential to current levels.
Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.