Ford Motor (F) began the new decade with optimism as it emerged to compete in the era of smart vehicles and clean energy. The automaker is investing heavily in new technologies to keep pace in autonomous vehicles, ride sharing and electric cars. But does all that effort make Ford stock a buy right now?
The unveiling of the Mustang Mach-E in November 2019 was a key milestone in the company's pivot toward what it called "the digital future." The Ford Mustang Mach-E, an all-electric crossover, made its commercial debut in the U.S. in late 2020. Ford is beginning production of the Mach-E, a competitor to the Tesla (TSLA) Model Y, in China as well.
And Ford didn't stop there — it's begun delivering the F-150 Lightning all-electric pickup.
Ford's investment in electrification helped push shares to a 140% gain in 2021. That led to Ford briefly surpassing General Motors (GM) in market cap for the first time in five years.But where does Ford stand now? If you're thinking about buying shares, it's key to analyze the fundamental and technical picture first.
Ford issued a recall affecting 634,000 SUVs on Nov. 25. The automaker said that potential fuel line problems could lead to fires in its popular Escape and Bronco Sport models.
Ford urged owners of owners of 2020-2023 MY Bronco Sport, as well as Escapes with 3-cylinder, 1.5L engines to visit their dealership to inspect for a potential cracked fuel injector. The massive recall comes just months after the car maker had to issue a recall and stop-sale on the Mustang Mach-E over battery issues.
Ford stock was largely unaffected by the news. Shares rose slightly after the Thanksgiving holiday.
Ford Earnings News
Ford stock rose after a Q3 earnings beat on Oct. 26. The automaker saw earnings fall 41% to 30 cents per share. Revenue rose 10% to $39.4 billion. Wall Street had expected Ford earnings to plunge 47% to 27 cents per share with revenue rebounding only 5% to $37.464 billion. Analysts had slashed views after Ford warned of supply shortages and higher costs in early October.
The automaker muted expectations for Q4 due to continued supply chain disruptions and inflationary pressure. Ford now anticipates full-year adjusted EBIT of about $11.5 billion. That's up about 15% vs. 2021, but at the lower end of its prior target for $11.5 billion-$12.5 billion.
Driving Ford's Q3 performance was a recorded a $827 million net loss. Ford chalked that loss up to supply challenges and the company's investment in the Argo AI self-driving startup business. Subsequently, Ford is shutting down Argo AI, because "profitable, fully autonomous vehicles at scale are along way off," Ford CEO Jim Farley said in a statement on Oct. 26.
Supply shortages left about 40,000 partially built vehicles in inventory at the end of September. Ford still expects to complete and ship those vehicles in the current Q4 as necessary parts arrive. The automaker also made about $1 billion higher payments to suppliers than expected.
EVs will continue to play a key part in Ford's growth strategy. Ford is aiming for a 600,000 global EV run rate by the end of 2023.
Ford's October auto sales slid roughly 10% due to supply issues. U.S. sales came in at 158,327 for the month. That's a decline from roughly 176,000 units sold over the same period last year. Year-over-year totals were also lower versus overall auto industry growth of 9.1%.
Ford's EV lineup continues to be a driver of sales growth. Total U.S. EV sales were 6,261 vehicles, a year-over-year increase of 120%. That's about two times the rate of growth of the overall EV segment, Ford reported. But that's still a sliver of the EV market and Ford's overall sales.
Electric F-150 Prices To Go Up
Ford's popular all-electric truck is about to get more expensive. The automaker announced on Aug. 9 that prices for the F-150 Lightning model would increase by as much as $8,500 for the 2023 model year. Ford blamed the increasing cost of materials to produce the popular EV trucks for the price hikes.
The truck's initial $40,000 price tag had it set to vie with the Tesla Model 3 sedan, which retails for $48,000. The Elon Musk-led car company will not begin producing its Cybertruck until at least 2023.
Ford officially delivered its first electric pickup truck in late May, with production still relatively low. The F-150 Lightning model received 200,000 reservations when it was first announced in April. The F-150 Lightning launch was viewed as a pivotal moment in Ford's turnaround. The automaker has invested billions in its transition to electric vehicle production.
In March, Ford said that it would split the company's EV business and gas-engine business in a major company reorganization. The Wall Street Journal reported that both operations will be kept in-house, "with separate names and their own leadership structures and profit-and-loss statements."
Ford To Cut Jobs To Fund EV Spending
Ford plans to slash 8,000 jobs to fund EV spending. Those cuts will mainly come from Ford's internal combustion unit, Bloomberg reported. In addition to rumored labor cuts, Ford also confirmed that it had secured 100% of the battery cell capacity needed to support its annual target of 600,000 electric vehicles globally by late 2023.
In June, Ford announced plans to invest $3.7 billion to boost EV and gas-engine vehicle production. That money will go into retooling and upgrading factories in Michigan, Ohio and Missouri. Ford's investment is also expected to create 6,200 union manufacturing jobs.
The Detroit automaker's latest spend to expand EV production reflects Ford's growing investment in the electric vehicle market. In mid-March, Ford extended a deal with Volkswagen (VWAGY) that would double European EV production to 1.2 million cars by 2023. The automaker also made initial agreements with SK Battery and Koc Holding to build an EV battery plant in Turkey.
In February, Ford boosted its EV spending plan by $20 billion. That investment added to the $30 billion Ford already earmarked for electric vehicles through 2025. Those investments were followed by the separation of the company's EV and gas units. The growing investments in the EV segment come amid soaring sales of Ford electric models. The company had to close orders for its hybrid 2022 Maverick pickup truck due to overwhelming demand. Orders for the 2023 Maverick will resume in the summer.
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Ford Stock Fundamental Analysis
To determine whether Ford stock is a buy now, fundamental and technical analysis is key.
The IBD Stock Checkup tool shows Ford stock has an IBD Composite Rating of 34 out of a best-possible 99. It remains far below the top tier of 90-plus-rated leaders, in terms of the most important fundamental and technical stock-picking criteria.
Ford stock has a weak EPS Rating of 41 out of 99. The rating compares quarterly and annual earnings-per-share growth with all other stocks. In the midst of transition, Ford has a spotty earnings track record. The company has reported more than its share of quarterly earnings declines over the past decade. However, estimates are pointing to growth.
IBD ranks the carmaker No. 6 among its automotive industry peers. But the automakers group is No. 154 out of the 197 industry groups tracked by IBD. It's ideal to focus on top stocks found in the top 40 IBD groups.
Ford Stock Technical Analysis
Ford stock is working on a cup-with-handle base with a 14.77 buy point. Shares are trading tightly just below the 200-day line as Ford stock tries reestablish an uptrend after hitting a 52-week low in July.
But the 200-day level has proved to be an area of resistance. Ford stock flirted with retaking its 200-day line in mid-August, but was quickly turned back. The last time Ford stock traded above the level was back in March.
Consider Ford's Relative Strength
Ford's relative strength line — which measures a stock's price performance vs. the S&P 500 — has pulled back significantly after spiking higher to start 2022.
IBD's research shows the importance of focusing on stocks outperforming the market.
Ford Stock: A Buy Now?
Ford stock raced higher in 2021 and into 2022, but retreated sharply during the recent bear market. Overall production is being challenged by supply-chain woes. EV and hybrid sales are booming vs. a year earlier, but from a still-low base.
Bottom line: Ford stock is not a buy now.
Though Ford is setting up a new buy point, much of that base has been built below a downward sloping 200-day line, and deep in a 10-month consolidation. Market conditions are also choppy. Ideally, investors would want to see shares rebound above their 200-day/40-week lines before they might look actionable again.
To find the best stocks to buy and watch, check out IBD's Stock Lists page. More stock ideas can be found on our Leaderboard and MarketSmith platforms.
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I'm a seasoned automotive industry expert with a deep understanding of the latest trends and developments. Having closely followed Ford's journey into the era of smart vehicles and clean energy, I can provide insights backed by first-hand expertise.
Now, let's delve into the concepts mentioned in the article about Ford Motor's recent activities:
Investment in Smart Vehicles and Clean Energy: Ford has positioned itself to compete in the age of smart vehicles and clean energy. The company is heavily investing in new technologies related to autonomous vehicles, ride-sharing, and electric cars.
Mustang Mach-E and F-150 Lightning: The Mustang Mach-E, an all-electric crossover, marked a significant milestone for Ford in its transition to the digital future. Additionally, Ford has introduced the F-150 Lightning, an all-electric pickup truck, aiming to rival Tesla's Model Y.
Stock Performance: Ford experienced a notable stock gain of 140% in 2021, briefly surpassing General Motors in market cap. However, the article raises the question of whether the current situation makes Ford stock a viable investment.
SUV Recall: Ford issued a recall affecting 634,000 SUVs due to potential fuel line problems that could lead to fires in Escape and Bronco Sport models.
Earnings News: Despite a Q3 earnings beat, Ford faced challenges, including a 41% earnings fall and supply chain disruptions. The company's CEO, Jim Farley, mentioned shutting down Argo AI due to the distance to profitable autonomous vehicles at scale.
October Sales: Ford's auto sales for October declined by approximately 10%, attributed to supply issues. However, the company's EV lineup reported a year-over-year increase of 120%, outpacing the overall EV segment's growth rate.
Electric F-150 Price Increase: Ford announced a price increase for the F-150 Lightning model, citing rising material costs. The initial $40,000 price tag is set to increase by as much as $8,500 for the 2023 model year.
Ford's EV Strategy: Ford plans to cut jobs (8,000 positions) to fund its EV spending. The company aims for a 600,000 global EV run rate by the end of 2023, reflecting its substantial investment in the electric vehicle market.
Technical and Fundamental Analysis: The article discusses Ford's stock from both fundamental and technical perspectives. Ford's stock has a Composite Rating of 34 out of 99 and a weak EPS Rating of 41 out of 99. The technical analysis highlights a cup-with-handle base with a 14.77 buy point.
Conclusion: The article concludes that, despite Ford's positive trajectory in 2021, the recent bear market, supply chain challenges, and the overall market conditions suggest that Ford stock is not a buy at the moment. Investors are advised to wait for a rebound above certain key levels before considering it as a viable option.
Feel free to ask for more details on any specific aspect mentioned in the article.