The last thing on the consumer’s mind is buying an automobile. So the low likelihood of a demand rebound for such expensive, luxury items will slow the recovery in Ford (NYSE:F), which already isn’t having a great year. F stock is trading at just a little more than half its price at the beginning of the year.
Besides, the stay-at-home order may have permanently changed the need to commute to work. And with lower demand for cars and the potential for excess supply as people sell them, why should investors even consider F stock?
Ford said it would delay the launch of its redesigned F-150 pickup, the Mustang Mach-E, and the Bronco sport-utility vehicle. This is due to the idling of its plants for around two months.
Fortunately, Hau Thai-Tang, Ford’s head of product development and purchasing, said that “we’re not going to do any additional delay to these launches beyond the impact of Covid-19 as a mechanism to conserve cash.”
As a forward-looking machine, markets will interpret the statement to mean that operations will resume when its plants open again.
A Closer Look at F Stock
Ford will lose around $5 billion in the quarter due to the shutdown and reduced demand. As operations resume, the company may continue the development of its new products. And by the time jobs return and the economy rebounds, consumer interest for Ford should improve.
Ford, General Motors (NYSE:GM), and Fiat Chrysler all planned to reopen North American factories on May 18. Ford has two near-term objectives. First, it needs to confirm that the new safety protocols will prevent any Covid-19 infections.
For example, this includes distancing among factory workers, face masks, and cleaning of work areas. Ford’s second objective is to re-start its product refresh pathway that appeals to a wary, price-conscious consumer.
Mainstream 2021 Mustang Electric Vehicle
Details of Ford’s 2021 Mustang Mach-E will give Tesla (NASDAQ:TSLA) fans something to think about.
The Mach-E will charge from 10% to 80% in just 38 minutes. This is half as fast as Tesla and is 30% faster than Ford’s preliminary estimates. But the electric crossover starts at $44,995 and is as high as over $60,000. By comparison, Tesla’s Model Y will start at $46,690 and may cost more than $65,000.
Getting 61 miles in range with a 10-minute charge improves the suitability of short, local commutes. Also, Ford grew its FordPass charging network by adding 1,000 stations. At each of those stations, it added 5,000 plugs.
On the software side of the EV business, Ford must win its customer’s confidence by building on quality and continued support. Long after the SUV leaves the dealership, Ford said all Mustang Mach-E models stay up-to-date. Using over-the-air updates, software updates will not take more than two minutes.
Exciting Opportunity for Ford
Ford’s upcoming quarterly losses put a damper on the company’s exciting EV launch ahead. But after finding support at the $3.96 bottom reached in late March, the automobile manufacturer is a worthwhile bet.
Simplywall.st reports the forecasted annual earnings growth is ~110%. It will reach profitability over the next three years. Conversely, this growth forecast suggests the stock has limited upside ahead:
|Sales Growth Next Year||17.80%||12.90%||11.20%|
|Sales 1‑Year Chg (%)||-5.60%||-9.00%||18.00%|
|Sales 3‑Year Avg (%)||-0.70%||-4.40%||12.50%|
|Sales 5‑Year Avg (%)||1.10%||-3.00%||6.50%|
Data courtesy of Stock Rover
To the right, you can see Ford’s value score compared to its competition.
Similarly, most of the 11 analysts rate the stock as a “hold.” The average price target is around $5 (according to Tipranks).
Ford may not reward investors in the next few weeks, but the stock is not for trading. It suits those who believe in the potential recovery in the automotive sector. But as its manufacturing plants re-open and the economy re-starts, the stock price should start pricing in the rebound potential ahead.
The author owns shares of Ford. Ford is discussed often in the DIY Value investing marketplace.