rtmark
LearnBonds.com

Ford Stock Falls Towards 52-Week Lows on Double Downgrade

ford

Ford stock (F) is trading sharply lower in early US price action today after Wells Fargo double downgraded the automaker along with General Motors. While F was among the top S&P 500 gainers in 2021, the stock has looked weak in 2022 amid the broader market sell-off.

F stock has now lost more than 50% of its market cap from the recent peaks and is in a deep bear market territory. What’s the forecast for the stock and is it a good buy after the crash?

Wells Fargo double downgraded Ford

It is not usual for analysts to double downgrade a stock. However, Wells Fargo analyst Colin Langan double downgraded both Ford and rival General Motors from overweight to underweight.

“BEV costs have massively risen & raw material supply is tight, yet tough US regulations are likely require more BEV sales. The raw material increase adds ~$4.8K and ~$8.5K in unplanned costs to the Ford Mach-E & Lightning, respectively,” said Langan in his note.

He added, “The market likely underestimates the permanency of recent raw material price increases & is not factoring in the impact of the recent aggressive US fuel economy regulations.” Langan warned of peak profitability for legacy automakers and halved his target price on Ford from $24 to $12.

Barclays is bullish on the stock

However, not all analysts agree with Langan. Last month, Barclays reiterated its overweight rating on F stock. It said, “As we noted in our upgrade of Ford last month, we see Ford’s upcoming Spring investor day as a catalyst for the shares, with Ford likely to announce a broader dedicated battery electric vehicle strategy. We also reiterate our OW on GM as the company continues to make progress securing its role in a future world of Disruptive Mobility (shared autonomous driving).”

Ford’s earnings

Ford reported revenues of $34.5 billion in the first quarter of 2022 which was 5% lower than the corresponding quarter last year. However, the company’s automotive revenues were $32.1 billion in the quarter which was slightly above the $31.13 billion that analysts were expecting.

The company’s adjusted EPS of 38 cents was also one cent above analysts’ estimates. Ford posted a net loss of $3.1 billion in the quarter as it booked losses on its Rivian investment. F and Amazon are the top Rivian investors and the value of Ford’s Rivian investment more than halved to $5.1 billion at the end of March.

The company declined to take any questions on the Rivian investment in the earnings call. It has since sold some Rivian shares after the lock-up period ended. Rivian stock tumbled after Ford offloaded the shares.

Guidance

Ford maintained the 2022 guidance of $11.5-$12.5 billion during the earnings call despite the headwinds. It also said that “The company has committed to reaching worldwide EV manufacturing capacity of at least 600,000 by the end of 2023, for which it’s ramping up battery supplies, on the way to making more than two million EVs annually by the end of 2026.”

Jim Farley

F has been transforming its business under its CEO Jim Farley who joined the company in 2020. In the recent round of transformation, the company announced that it would create separate business entities.

F has reorganized its business and Ford Blue would look after its legacy ICE business. The business would work towards lowering costs, improving quality, and would also provide manufacturing and engineering capacity for the entire company. The second business would be Ford Model e which would look after the company’s EV operations.

Ford also announced an increase in its capital outlay toward electric cars. It would spend $50 billion by 2026, which is $20 billion higher than its previous guidance.

F-150

The company has also begun the delivery of its F-150 all-electric pickup. The model has been America’s best-selling pickup for decades and Ford expects to recreate the magic with the electric version as well. The model has been well received so far. However, it is set to counter increased competition including from Tesla which would launch its own pickup model the Cybertruck in 2023. Cybertruck was expected to debut in 2022 only but Tesla later extended the timeline amid the global supply chain crisis.

Morgan Stanley is bearish on Ford stock

Morgan Stanley analyst Adam Jonas, who is among the most prominent Tesla bulls, did not find Ford’s transformation plan realistic. He expects Ford to deliver only about 560,000 electric cars by 2026, which would be just over a quarter of what the company is forecasting.

“At this stage we simply do not have confidence in the ability for Ford–or GM for that matter–to secure the materials …in sufficient quantity and quality/efficacy to deliver on an EV number anywhere near this level within four years,” said Jonas in his note.

He also raised doubts about the long-term margins that Ford projected. During their first quarter 2022 earnings call, Ford said that is targeting a companywide adjusted EBIT margin of 10% by 2026.

Ford looks like a good stock to buy

Ford looks like a good stock to buy especially after the massive fall from the peaks. The company has also initiated a dividend and the yield of 3.3% is better than the S&P 500’s yield. The company’s EV models are getting a good response from buyers and the new business structure would help it better align the synergies towards the high growing EV business.

While there are genuine concerns over peak profitability, at an NTM (next-12 months) PE multiple of just around 6x, F looks too cheap to ignore.

You can trade in Ford stock through any of the reputed online stockbrokers. Alternatively, if you wish to trade derivatives, we also have reviewed a list of derivative brokers you can consider.

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission on real stocks

Rating

64 traders signed up today

Visit Now

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.