For months, shareholders have watched Ford (NYSE:F) stock struggle to recover its losses incurred by the onset of the novel coronavirus. It’s been frustrating, no doubt, to see the share price get trapped in a range.
Is there a catalyst that can help F stock break out and climb back to double digits? Or is there no chance of a recovery in 2020? It’s a fascinating debate, with InvestorPlace contributor Bret Kenwell squarely in the bearish camp. He says, “There’s simply no reason to be long Ford at this time.”
Maybe he’s right, or maybe we can find a reason or two if we look hard enough. It would be a shame if F stock were to stay at the current price point for the remainder of the year. And if Ford can at least achieve a moderate level of productivity, that could be the catalyst for a turnaround.
Getting Back to Work
While Kenwell’s arguments are mostly bearish on F stock, he does bring up a good point about the coronavirus’s fiscal impact. Kenwell notes that it “is not expected to be prolonged. Unlike the housing crisis a decade ago, there’s a clear-cut reason for what’s happening.”
Moreover, this could provide hope for automakers as “the expectation is that we’ll get back to work sooner rather than later. Even though business will start back up slowly, we are under an intentional shutdown, not a natural one — and that’s a good thing!”
Ford wants to get back to work and while the pre-coronavirus level of productivity might not be realistic right now, the company is making strides towards semi-normalcy. To see this in action, we can look at the stats in China, a massive and important automotive market.
Ford’s plants in China are open again, and the automaker sold more than 40,000 vehicles in that country during March. This represents an impressive bounce and could signal that the worst is over, at least in that particular region of the world.
And let’s not ignore the fact that Ford is scaling up production in Europe. Given enough time, it’s reasonable to expect global automotive sales to recover. With the F stock price trading at such a discount, even a partial automotive-market recovery could send the shares higher.
An American Classic
A major question on the shareholders’ minds, though, is how Ford is doing in the U.S. After all, Ford is considered an institution among American companies.
And so, it’s nice to be able to report some good news. Even during the pandemic, Ford’s American plants haven’t been idle. They’ve been manufacturing medical equipment, thereby providing value not only for the shareholders but for the populace.
Ford spokesman Mike Levine explains how the company stayed productive in the fight against the coronavirus:
“We’re proud to share details of our employees’ multiple efforts to help the world fight COVID-19, including face shields, masks, powered air-purifying respirators, gowns for medical workers and working with GE (NYSE:GE) Healthcare to produce ventilators for patients.”
That’s great, but of course F stock investors mainly want to know about Ford’s progress in U.S. automotive production. Thankfully, there’s encouraging news on that front.
The company recently announced that on May 18, it will commence a phased restart of Ford’s U.S.-based production lines. Not only that, but Ford also plans to bring 12,000 employees with “location-dependent” roles (i.e., they can’t just work from home) back to work.
Thus, the employees and shareholders have cause for celebration. Ford is phasing the workers back in, getting its U.S. manufacturing plants rolling, and providing hope to struggling stockholders.
The Takeaway on F Stock
Is there an argument to be made that there is “simply no reason to be long Ford at this time”? You’re certainly invited to read Kenwell’s excellent article and decide for yourself.
On the other hand, an automotive-market recovery could be under way globally and in the U.S. If so, then you might find a reason to take a long position in F stock.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
