Shares of Ford (NYSE:F) have been doing surprisingly well so far this year. While the shares are is still down 15% over the past 12 months, F stock has roared higher by more than 26% so far in 2019.
While the stock — like most — was oversold in late December and enjoyed a healthy bounce coming into 2019, its momentum has kept going. Shares drifted higher ahead of earnings in late April and have done very well since. All the while, shares still yield more than 6% from the dividend.
So what do we make of Ford stock going forward? While it has done well so far this year, the automaker is far from being out the woods on the fundamental side. Technically speaking, shares are pulling back off $10.50. However, should Ford stock become a buy-the-dips candidate and reclaim this mark, higher prices could be in order.
Valuing Ford Stock Price
To be sure, it’s not clear where Ford is heading. At least not in my mind. The company has been collaborating with Volkswagen (OTCMKTS:VLKAF) and has its self-driving unit, Argo. But it’s got some very different plans than some of its peers — at least publicly.
Ford has talked of delivery robots and smart cities, while General Motors (NYSE:GM) looks to run a mobility-as-a-service (MaaS) platform similiar to Alphabet’s (NASDAQ:GOOGL) Waymo. Even Nvidia (NASDAQ:NVDA) is working with companies like Daimler (OTCMKTS:DDAIF) and Toyota (NYSE:TM) on self-driving technology.
As far as current operations go though, Ford is going about things in a smart manner. The company has slashed its exposure to the sedan market and is focusing on the far more profitable truck and SUV markets. While this is a smart move that should increase profitability, it’s not a fast one. And it’s not like Ford is struggling to find a way to manage all of its newfound growth.
Analysts expect revenue to fall 1.8% this year, followed by a 20 basis point gain in 2020. Given the lower product offering, it’s surprising they don’t expect sales to fall even more. In that case, one would expect more optimistic earnings growth, which we actually get this year. Estimates call for roughly 7% earnings growth this year and about 70 bps of growth in 2020.
All told, investors are paying just under 7x earnings for a stock with decent earnings growth on no revenue growth and a 6.16% dividend yield. Fundamentally, Ford is far from perfect. But in this case, it’s no longer a disaster. That brings us to the charts.
Trading F Stock
What do we need to see happen? We need to see Ford stock price stay north of $9.50. Just like when we were watching F stock for a breakout over this level earlier this month, we must now see this level hold as support.
Click to Enlarge
Why? Because it has proven significant in the past. From late 2015 to early 2018, this area served as support. Once Ford stock broke below it last summer, it then turned to resistance. So now we must see it hold up again to prove that the tides are changing in bulls’ favor.
Below $9.50 opens up the door to the downward trending 50-week moving average. However, should it hold, it gives F stock another chance to test short-term downtrend resistance (blue line), as well as the 200-week moving average. Above those levels and Ford stock can really punch the gas and start racing the higher.
The only problem? Sentiment. There are big concerns about automakers and they’re well justified. Growth is slowing around the globe, while the trade war with China isn’t doing Ford, GM and others any favors. That’s on top of secular fears — partly driven by Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) — that auto demand will permanently fade. Put simply, there are cyclical and secular worries for automakers. That will make them tough longs, but as long as support holds up, investors can have some confidence.
Watch $9.50, it’s important.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long NVDA and GOOGL.
