There were some announcements by Ford (NYSE:F) last week that, combined with other tailwinds, helped spark a 15% in F stock Wednesday.
First, the company said it will be doing its part to ensure that hospitals have the medical equipment they need to fight the coronavirus pandemic.
The company is working with General Electric (NYSE:GE) subsidiary GE Healthcare to produce hospital ventilators that can be mass-produced. Ford also plans to begin manufacturing full-face shields for hospital workers and first responders. The company plans to produce up to 100,000 protective shields per week.
And the sentiment toward F stock rose even higher after lawmakers reached a tentative agreement on the $2 trillion economic stimulus package. This was good news for the automaker and gave investors some much-needed relief.
The COVID-19 crisis is far from being resolved, but there are many reasons to be hopeful about Ford’s ability to bounce back from the economic downturn. Listed below are three reasons to be optimistic about F stock in the coming year.
1. Ford Can Survive Shutdowns
On March 18, Ford announced that it was suspending production at its factories in the U.S., Canada, and Mexico until at least March 30. The company plans to take this time to clean the facilities and review its inventory levels.
Even after Ford reopens its factories, it’s likely that the company will face a decrease in demand over the next year. However, Ford has ample cash reserves that will allow the company to survive extended factory shutdowns.
Since 2009, the company has maintained a cash reserve of at least $20 billion, with an additional $10 million available on lines of credit.
2. Ford Is Conserving Cash
In the past week, Ford has taken several steps to converse cash and improve its balance sheet. Last week, the company announced it was temporarily suspending dividend payments. In 2019, the company paid over $2 billion in dividend payments, so that alone is a substantial savings opportunity.
Ford also announced that it is borrowing over $15 billion from its two existing credit lines. This will allow the company more flexibility over the coming months.
3. Ford Will Continue Investing
Like many companies, Ford is going to be looking for ways to conserve cash. But that doesn’t mean the company will stop focusing on product development. In the future, the company still plans to move forward with electric vehicles and self-driving cars.
Overall, Ford has given itself a little breathing room and the company will be okay for the time being, in spite of the lost revenue. The biggest question F stock investors need to consider is how quickly the economy will recover after the pandemic is over.
If the country moves into a recession, then Ford’s problems could last a lot longer than a couple of months.
Jamie Johnson is a personal finance freelance writer and has been writing for InvestorPlace since mid-2019. She writes for a number of other well-known financial sites, including Credit Karma, Quicken Loans and Bankrate. As of this writing, Jamie Johnson did not hold a position in any of the aforementioned securities.