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 its first 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.
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, though it’s unclear how quickly production and deliveries will ramp up. 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 stock jumped on the news.
Ford auto sales saw a significant bounce in July. U.S. sales hit 163,942 vehicles last month. That’s a gain of 36.6% year-over-year versus an overall industry sales decline of 10.5%.
Sales of the F-series models boosted Ford’s totals. The Detroit automaker sold 63,341 F-series pickups in July. That’s the first time units have climbed above the 60,000 mark.
Monthly EV sales totals also continued to climb, growing at three times the rate of the overall electric vehicle segment. Ford sold 7,669 electric vehicles in July, a sales surge of 169% from the previous year, though still from a relatively low base. Those numbers include 2,173 units of the F-150 Lightning all-electric pickup which began deliveries in June.
Ford crushed Q2 earnings on July 27. The automaker saw earnings skyrocket 423% to 68 cents per share. Revenue leapt 50% to $40.19 billion, both easily beating vies. That jump was driven by “a 35% increase in wholesale shipments together with favorable pricing and vehicle mix.”
Ford stock jumped on the report.
Despite inflation and supply chain headwinds, Ford saw strong demand for its internal combustion and electric vehicle lineup. The automaker ended the quarter with $29 billion in cash and $45 billion to fund its EV and other growth initiatives.
Ford maintained its outlook for the year on Wednesday. Executives anticipate a full-year 2022 adjusted EBIT of $11.5 billion to $12.5 billion, up 15% to 25% from last year. These numbers assume a 10%-15% growth in vehicle sales and continued strong pricing. Management also sees overall costs increasing to $3 billion for the year. That number is up by $1 billion from the previous quarter.
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. Ford stock rose on July 21 after the news as the automaker announced a slew of moves to reach its ambitious production targets. 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.
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 76 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 51 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. 4 among its automotive industry peers. The automakers group is No. 83 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 surged 140% in 2021, hitting a long-term high in early January. But shares have fallen significantly since then, hitting a 52-week low on June 17.
Shares recently climbed back above their downward sloping 10-week line on July 19 on EV battery news. That’s the first time Ford stock has been above that key support level since January. Ford stock climbed further after it crushed Q2 earnings estimates on July 27.
Shares are now consolidating just below the 200-day moving average.
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 the new year, but retreated sharply during the recent market correction.
Bottom line: Ford stock is not a buy now.
While Ford has clearly broken its downtrend, investors should wait to see if Ford stock can sustain its move above the 10-week line as it forms a new base. The next hurdle for Ford stock would be to clear its flattening 40-week line.
Though the reaction to Ford earnings was strong, a buy there would have been risky since the stock had yet to build a proper base. Shares are also more than 10% above the 10-week line, which is considered extended.
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