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 former CEO James Hackett called “the digital future.” The Ford Mustang Mach-E, an all-electric crossover, recently made its commercial debut in the U.S., with European deliveries imminent. Ford is beginning production of the Mach-E in China as well. The Mach-E is a competitor to the Tesla Model Y.
This new future also includes a pivotal tech partnership with Alphabet-owned Google (GOOGL) and a slew of other new vehicle launches. Among them: a completely redesigned F-150 truck and resurrected Ford Bronco brand. Additional strategic partnerships include Volkswagen (VWAGY), Rivian and Mahindra to strengthen Ford’s global presence.
Ford stock is moving higher after a prolonged downtrend, 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.
Ford Delivers Record EV Sales
Ford in early March reported record electric-vehicle sales in February, the first full month of sales for the Mustang Mach-E. The electric-crossover vehicle put a dent into Tesla’s Model Y U.S. market share.
Morgan Stanley analysts said in a note to investors on March 2 that the Ford Mustang Mach-E stole EV share from Tesla last month. “Tesla’s share fell to 69% from 81% the prior year,” the Morgan Stanley analysts wrote. “The Ford Mustang Mach-E accounted for nearly 100% of the share loss,” they said.
The automaker sold 3,739 Mustang Mach-E electric vehicles. Sales of the hybrid F-150 truck also boosted EV and hybrid sales last month to 9,267 units. That number is up 56% from a year ago.
Ford stock is performing much better than Tesla stock as of late.
On Feb. 4 Ford reported a Q4 earnings surprise, lifting shares. The automaker’s EPS rocketed 183% to 34 cents on revenue of $33.2 billion.
Analysts expected Ford’s quarterly report to reflect a loss of 7 cents a share on revenue of $32.89 billion.
Ford stock is rebounding thanks in part to new strategic investments in the electric-vehicle space. CEO James Farley said the company will accelerate those investments in the coming quarter. Ford plans to pump $29 billion into electric and self-driving car technology through 2025.
“The transformation of Ford is happening, and so is our leadership of the EV revolution and development of autonomous driving,” Farley said in a Feb. 4 earnings statement.
“We are accelerating all our plans — breaking constraints, increasing battery capacity, improving costs and getting more electric vehicles into our product cycle plan,” he said.
However, Ford warned a global chip shortage could adversely impact operations. Farley said the Detroit automaker could lose 10% to 20% of planned Q1 production due to the chip shortage.
Ford has even temporarily halted production of its highly profitable F-150 pickup at various times due to chip shortages.
Ford’s next quarterly report is due on April 28. Analysts expect earnings of 14 cents a share on revenue of $32.63 billion.
Google Partnership Lifts Ford Stock
Ford stock gained 2.9% on Feb. 1 after CEO James Farley announced the 117-year old automaker is partnering with tech giant Google. The Michigan-based carmaker and Alphabet-owned company will form a new collaborative group called Team Upshift.
“We’re going to leverage the talent and assets of both companies to push the boundaries of Ford’s transformation,” Ford Motor wrote in a company blog post. “This may include projects ranging from modernizing our plants through vision AI, developing new retail experiences when buying a vehicle, creating new ownership offers based on connected vehicle data, and more.”
In addition to the joint venture, the deal will make Google the preferred cloud service for the Detroit automaker.
New Ford CEO Takes The Helm
On Oct. 1, COO James Farley took the helm as Ford’s CEO. His tenure began with a shake-up of key leadership roles. Ford announced Tim Stone is vacating his role as CFO. He was replaced by John Lawler, who recently oversaw Ford’s autonomous vehicle unit.
Along with Farley’s new position came a ramp-up in Ford’s intent to invest more in emerging technologies, including autonomous vehicles, electric cars and software-as-a-service capabilities. Ford stock investors have welcomed the changes, with shares almost doubling from last October through early February.
Farley stepped in after disappointing results in Hackett’s three-year bid to reshape the automaker. The centerpiece of Hackett’s tenure was an $11 billion restructuring plan. That plan ran into major roadblocks when Ford botched the redesign and launch of its popular Explorer SUV in 2019.
All in all, Ford stock declined roughly 60% during Hackett’s time as CEO.
In addition to C-suite changes, Ford announced last July it was resurrecting its iconic line of Ford Bronco SUVs. Production of the new Bronco lineup will include two-door and four-door models, as well as a smaller Bronco Sport edition. Consumers can now see some of the new Bronco models, set to hit showrooms in May 2021, online.
Bronco Relaunch Part Of New Strategy
The relaunch of the Bronco SUV — which was discontinued in 1996 — is part of Ford’s overall strategic initiative to capitalize on its iconic brand lineup to boost U.S. revenue and earnings.
Ford President of the Americas & International Markets Group Kumar Galhotra told CNBC last July he expects annual unit sales of the new Ford Bronco series to be “in the hundreds of thousands.” The Bronco SUV family is set to directly compete against the popular Jeep brand owned by Fiat Chrysler (FCAU).
The revival of the popular Bronco vehicle models came just weeks after the Detroit-based car company unveiled details of the latest version of its top-selling Ford F-150 pickup truck in late June. The truck is the first Ford vehicle to support over-the-air software updates, first pioneered by Tesla (TSLA) in 2012.
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 86 out of a best-possible 99. The rating means Ford stock ranks very well vs. all stocks, in terms of the most important fundamental and technical stock-picking criteria.
Ford stock has an EPS Rating of 75 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 ahead.
The rankings place the carmaker in the No. 3 spot vs. its automotive industry peers. Because of its huge run over the past year, a now-damaged Tesla (TSLA) still holds the No. 1 slot in IBD’s Auto Manufacturing industry group, which is No. 89 out of the 197 industry groups tracked by IBD. Stellantis (STLA) is ranked second.
Ford Stock Technical Analysis
Ford stock is testing its 10-week line. Shares have pulled back over the last week amid chip shortages affecting auto production.
This marks the first pullback below that key support level since Ford stock broke out of a flat base to start its current run. Now it appears Ford is working on another flat base on its weekly chart, according to MarketSmith pattern recognition.
This week is pivotal for Ford stock. If shares close 2% or more below the 10-week line by the end of the week, that would be a decisive sell signal. But if Ford can bounce off the 10-week, that could potentially be a signal to buy. The automaker has flashed multiple entry points over the last few months since clearing a 9.60 buy point on Jan. 12.
On April 5, Ford climbed back above its 21-day line after falling below that level in late March. Ford stock cleared the 21-day and its highs from the prior few weeks. That created an actionable buying opportunity for investors.
An upside reversal at the 50-day line was an earlier opportunity for shareholders to initiate a position. Before that, Ford stock presented a three-weeks-tight entry of 12.14. Also, 12.25 was considered another proper buy point as the stock cleared a short consolidation.
Another bullish factor? Ford’s Relative Strength Rating has improved alongside the stock’s share price gains. The RS Rating for Ford stock is now an 86. That means Ford has outperformed 86% of all stocks over the past year. Elite growth stocks boast even higher scores, but this is a positive development for Ford.
Ford’s relative strength line — which measures price performance vs. the S&P 500 — has pulled back slightly but is still near its highest levels in about 20 months.
It’s important to note that Ford has underperformed the S&P 500 for the better part of the last decade. But looking at a monthly chart, Ford is now solidly above its 24-month moving average. Closes above that level for the past five months are a big step in the right direction.
Ford Stock: A Buy Right Now?
Ford stock is breaking above its long-term downtrend going back to 1999. Looking at the daily chart, shares are finding support at key levels as they make a big move off 2020 lows. As for the fundamentals, Ford sales and profits are rebounding. The company is moving more into electric vehicles, too. However, chip shortages are a wild card for Ford and the entire auto industry.
Those who bought the stock coming out of recent buy points are likely basing their purchases on strong 2021 estimates for this turnaround play.
Bottom line: Ford stock is trading below its 10-week line and working on a five-week flat base with a 13.72 buy point. A bounce off this key moving average could present another entry point for investors. But if Ford drifts lower, it would be a strong sell signal.
Another factor to consider? Ford is due to report earnings on April 28. Typically, investors should avoid making new buys right ahead of a quarterly report. It’s ideal to have a profit cushion of at least 5% heading into earnings.
While that’s possible to achieve in a matter of a few days of trade, the closer investors get to the quarterly report, the riskier that buy would be. At that point, it would be better to wait for a positive reaction after Ford reports earnings before buying.
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