Ford Motor (F) began the new decade with optimism as it emerged from a fundamental corporate redesign to compete in the era of smart vehicles and clean energy. The automaker is investing heavily in new technologies to keep pace with competitors in the markets for autonomous vehicles, ride sharing and electric cars. But is Ford stock a buy 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. late last year. 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 at electrification with a crossover — it now has an electric version of the F-150 as well.
This new future also includes a pivotal tech partnership with Alphabet (GOOGL)-owned Google and a slew of other new vehicle launches. Among them: a resurrected Ford Bronco brand. Additional strategic partnerships include Volkswagen (VWAGY), Rivian and Mahindra to strengthen Ford’s global presence.
After a prolonged downtrend, Ford stock went on a big run from 2020 lows, along with peer General Motors (GM). If you’re thinking about buying shares of Ford, it’s key to analyze the fundamental and technical picture first.
August Sales Drop 33% On Chip Shortage
Ford’s August retail sales fell by a third. The automaker reported a 33.1% decline in sales for the month as the chip shortage continues to hamper production. Sales of the popular F-series trucks dropped by nearly a quarter, while car sales plummeted 86%.
In late August, Ford said it would temporarily halt production of the popular F-150 pickup truck. The shutdown of the Kansas City production facility was expected to end, and production to resume Aug. 30. But that cut was extended to Sept. 6 due to the parts shortage.
The ongoing chip shortage is weighing on auto stocks. Shares of the country’s top automakers moved lower last month as production cuts loom over the industry. Toyota announced it would slash production in September by 40%. GM also plans to pause production of its electric Chevy Bolt model. A spike in coronavirus cases in Southeast Asia is putting new pressure on an already fragile semiconductor supply chain.
During Ford’s annual shareholder meeting on May 13, CEO Jim Farley said the company is weighing future strategies to deal with chip woes. Some of these strategies include redesigning car components to work with more accessible chips and cutting supply deals directly with chip foundries.
Ford Stock Rises On Biden EV Plans
In early August, Ford stock rose after the Biden administration announced new national targets for EV sales. The plan sets a voluntary target for 2030 to make roughly half of all cars and light truck sales in the U.S. electric or hybrid vehicles. The new targets outlined in the coming executive order are supported by major automakers like Ford, GM and Stellantis (STLA).
President Joe Biden also is set to announce tougher federal fuel economy standards. Those new standards will raise miles-per-gallon performance and tailpipe emissions thresholds for vehicles through the 2026 model years.
Despite the temporary bump, Ford stock has been trending lower since peaking in early June.
Ford Stock Earnings
The automaker’s earnings continue to grow despite hurdles posed by a global chip shortage. Ford stock beat expectations for Q2 earnings on July 28. Ford earnings came in at 13 cents per share on revenue of $26.8 billion. Wall Street expected the automaker to deliver a loss of 3 cents per share on revenue of $23.01 billion.
Ford stock jumped above its 50-day line on the news, but that’s proving to be a resistance level for the stock at this time.
The Q2 beat came as the company navigated headwinds from the chip shortage rocking the automotive industry. In April, the automaker had projected a 50% decrease in production in response to the shortage, implying a loss for Q2. Instead, Ford grew its business in the most recent period. Ford executives credited pent-up demand and better flow of chips for the boost in profits on the company’s July 28 earnings call.
Strong demand for Ford’s EV products also played a pivotal role in lifting Ford stock earnings. The Mustang Mach-E is currently the No. 2 selling electric SUV in the U.S. market. Ford’s F-150 Lightening has racked up 120,000 reservations since May. Three-quarters of those future sales come from customers who are new to Ford.
“We’re on a new path, with the Ford+ plan, financial flexibility and a resolve to make us an even stronger company,” CFO John Lawler said in a July 28 earnings release. “We’re developing connected, high-quality vehicles and services that are great for customers and profitable for Ford.”
The carmaker also raised full-year adjusted EBIT guidance to $9 billion-$10 billion, citing improvements in chip availability.
Ford Stock Gains After Self-Driving Deal
Ford is partnering with ride-sharing giant Lyft to bring self-driving cars to the road. On July 21, the Detroit automaker, along with Argo AI, announced a plan to add autonomous vehicles to Lyft’s service operations by the end of 2021.
The companies said they plan to debut the AV fleet in Miami this year, with service to follow in Austin in 2022. Lyft passengers will be able to select self-driving cars in defined areas through the app as services come online. The cars will still have two safety drivers to ensure the vehicle is performing correctly as the nascent program rolls out.
“This is the beginning of an important relationship between three dynamic companies ultimately aiming to deliver a trusted, high-quality experience for riders in a multicity large-scale operation over time,” Ford Autonomous Vehicle and Mobility head Scott Griffith said in a July 21 release.
Ford stock rose. Lyft stock also bounced on news of the deal. The companies aim to have 1,000 self-driving vehicles in service by 2026.
Mustang Mach-E Named EV Of The Year
Ford snagged Car and Driver’s 2021 EV of the Year award. The magazine, which publishes an annual list of best autos, singled out the Mustang Mach-E as its top pick in the electric car category.
“For new EV converts, piloting a Mach-E isn’t so different from driving a gas-burning SUV,” said the July 7 review from Car and Driver. “It’s the right car to bring drivers along during this watershed moment as EVs transition from niche alternative to new normal.”
Though the Ford Mach-E took top honors over rival Tesla, Ford stock fell despite the news. Shares are now pulling back toward their 50-day moving average.
Ford Puts More Money Into EVs
Ford outlined plans to increase investments in electric vehicles at its annual investor day on May 26. The automaker also expects costs of EV batteries to drop sharply. Ford stock rose.
Spending related to EV initiatives is expected to grow to more than $30 billion by 2025. The car company previously planned an investment of $22 billion on EV development. Ford expects nearly 40% of its global vehicle volume to be electric by 2030.
“This is our biggest opportunity for growth and value creation since Henry Ford started to scale the Model T, and we’re grabbing it with both hands,” CEO Jim Farley told investors on May 26.
Acquires Battery Charging Startup
Ford on June 17 announced the acquisition of Electriphi. The California-based startup provides battery-management and charging solutions. The deal is expected to boost Ford’s capabilities to develop battery charging and management services as it ramps up electrification efforts. Ford stock fell slightly.
“With Electriphi’s existing advanced technology IP in the Ford Pro electric vehicles and services portfolio, we will enhance the experience for commercial customers and be a single-source solution for fleet-depot charging,” Ford Pro CEO Ted Cannis said in a June 17 statement.
Ford Pro projects the charging depot segment could grow to 600,000 vehicles by 2030 and bring an additional $1 billion in revenue in that same time frame.
Ford did not disclose how much it’s paying for the San Francisco-based company. But executives say the acquisition is part of Ford’s $30 billion investment in electrification efforts. The deal is expected to close by the end of June.
Ford Launches Lightning F-150 EV
Ford on May 19 officially debuted its electric pickup truck, the F-150 Lightning. Just a day earlier, President Joe Biden visited a Ford plant in Michigan to tout his $174 billion electric-vehicle plan and take Ford’s electric truck for a test drive.
Ford stock surged 13% for the week, signaling investors are bullish about the sales potential for the newest version of the popular pickup model.
“Every so often, a new vehicle comes along that disrupts the status quo and changes the game … Model T, Mustang, Prius, Model 3. Now comes the F-150 Lightning,” CEO Farley said in a May 10 news release.
Production of the new F-150 won’t begin until 2022. The new model will compete amid a growing marketplace lineup of electric pickups. In addition to Tesla‘s (TSLA) heavily publicized Cybertruck, GMC and Chevy also have announced plans to release electric versions of the Hummer and Silverado truck models, respectively.
A Rivian EV pickup launches in June with GM’s Hummer EV out later this year. The Tesla Cybertruck is expected to launch sometime in 2022, but it’s unclear when.
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 72 out of a best-possible 99. The rating means Ford stock ranks relatively well vs. all stocks, but not outstanding, in terms of the most important fundamental and technical stock-picking criteria.
Ford stock has an EPS Rating of 65 out of 99, which compares quarterly and annual earnings-per-share growth with all other stocks. While that score could be better, it has improved since the last quarterly report. Ford has a spotty earnings track record, with many quarters of earnings declines over the past decade. But forward-looking estimates are pointing to growth.
The rankings place the carmaker in the No. 5 spot vs. its automotive industry peers. IBD’s automaker group is ranked a weak No. 104 out of the 197 industry groups tracked by IBD. In general, it’s ideal to focus on top stocks in the top quartile of IBD’s groups, but the market underperformance from Tesla this year in particular, until recently, is weighing on the ranking.
Ford Stock Technical Analysis
A broad market pullback in mid-July sent Ford stock south of a key support level. Shares tumbled 6% the week of July 16, triggering a strong sell signal with a definitive break of the 10-week line.
Before that, Ford stock was testing support at the 10-week line. Pullbacks to that level can be a critical test — they can either mark a buying opportunity if a stock finds support, or cue selling if the stock loses support.
Another sell signal? Shares round-tripped a double-digit gain from a breakout above a flat-base entry of 13.72 in late May.
Ford stock was building a new base with a 16.55 buy point. But the ongoing chip shortage has put renewed pressure on auto stocks. Ford stock dropped 7.5% the week of Aug. 20, undercutting its lows from late July. That’s not a positive sign. Shares are now testing support near their 40-week line.
Ford went on a big run earlier this summer. Shares broke out of a flat base in late May and hit the 20% profit zone within two weeks. Then, Ford started pulling back.
A rebound off the 21-day exponential moving average on June 21 was a potential buying opportunity for existing shareholders to add to their positions. While that was a tough hold, another entry opportunity came as Ford stock tested support at the 50-day line and its prior 13.72 buy point on July 7.
While these alternate entries ultimately didn’t work, investors who used closes below the 21-day and 50-day support levels as their exits were able to properly manage their risk.
Consider Ford’s Relative Strength
It’s also important to consider Ford’s relative price performance. Ford’s relative strength line — which measures a stock’s price performance vs. the S&P 500 — is at its lowest levels in several months.
IBD’s research shows the importance of focusing on stocks outperforming the market. Investors should keep an eye on Ford’s performance vs. the S&P 500 as it seeks to find a bottom.
Ford Stock: A Buy Now?
On a monthly chart, Ford stock is breaking above its long-term downtrend going back to 1999. Looking at the weekly chart, shares have made a big move off 2020 lows. Ford broke out of a flat base in late May and is building a base.
As for the fundamentals, Ford sales and profits are rebounding. The company is moving more into electric vehicles, too. However, chip shortages are weighing on Ford and the entire auto industry.
Bottom line: Ford stock is not a buy now. While shares briefly cleared a declining-tops trend line on July 29 on the heels of an estimate-beating earnings report, they quickly found resistance at the 50-day line. A chip shortage also is weighing down the auto industry.
Investors should watch to see if Ford stock can establish a sustained uptrend above its 50-day line and then build a base with a proper entry point.
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