With the economy strongly rebounding and auto sales recovering, now is a good time to buy Ford (NYSE:F) stock. In the coming months, Ford should also benefit from its scheduled launch of new versions of popular vehicles, and it has apparently even found a way to capitalize on the e-commerce revolution.
However, Ford continues to meaningfully trail General Motors (NYSE:GM) when it comes to self-driving vehicles and electric cars. Consequently, I remain more upbeat on GM than F stock.
Macro Factors Will Boost Ford
The much stronger-than-expected May unemployment report shows that, as I’ve predicted, the economy has been more resilient than many anticipated. The higher paying sectors like health care, finance, tech and government continue to be largely unscathed by the crisis. Other industries are bouncing back as states reopen their economies.
Moreover, as I’ve also suggested, fear of the virus is receding as more Americans realize that it’s highly unlikely to kill people who are not elderly or very sick. Also helping to reduce worries about the virus is the media’s reduced focus on it in recent weeks and the significant drop in U.S. daily death totals in recent weeks. States that have completely reopened their economies haven’t been hit with large increases in death totals, and there are suggestions from experts that the virus could be weakening.
The reduced fear of the virus and the reopening of states, in turn, has caused Americans to drive much more than they did in the early weeks of the crisis and to become more certain that they will drive automobiles a great deal in the future.
As a consequence, U.S. auto companies sold many more vehicles than expected in May. Specifically, auto sales came in at a seasonally adjusted annual rate of 12.2 million in May, versus analysts’ average estimate of 11.1 million. And seasonally adjusted auto sales were down 29% year-over-year last month, versus the 50% year-over-year decline in April.
Of course, the much higher-than-expected sales and the month-over-month rebound is very good news for Ford and F stock.
Catalysts to Lift Ford Stock
Ford is expected to launch a new version of its popular F-150 pickup in September. According to the Detroit Free Press, “the F-series, perpetually America’s best-selling vehicle, is Ford’s best seller and biggest money maker.”
Ford is likely to unveil a sporty version of the Bronco in September and a more traditional Bronco in February. Finally, the company will launch the Mustang Mach-E, a sporty, crossover electric vehicle, in September. Automobile reporters and pundits seem excited about the new launches.
Over the longer term, Ford can benefit from strong demand for electric vans for the delivery of e-commerce orders; the company is looking to manufacture 10,000 electric delivery vans in 2022. Apparently, such delivery vans are all the rage after Amazon (NASDAQ:AMZN) ordered 100,000 of them from startup Rivian in 2019.
Ford Versus GM
Ford still remains meaningfully behind GM in the important categories of self-driving vehicles and electric cars. GM’s Cruise unit has developed a semi-autonomous system that is being used on large roads such as interstates. It is working on expanding the system to smaller roads. I found no evidence that Ford has a similar system.
Further, GM appears to be way ahead of Ford in the area of fully autonomous vehicles. While GM has already produced a fully autonomous vehicle, the Cruise Origin, Ford still has not done so. While the Origin made food deliveries in San Francisco during the pandemic, Ford recently announced that it would delay the launch of its fully autonomous vehicle until 2022.
Finally, GM already has a hugely successful EV, the Bolt, and is getting ready to unveil many electric vehicles, while Ford is far behind many of its competitors, including GM, in the category. In fact, on its website, Ford is advertising only one pure EV, the Mach-E, which, as I noted earlier, is not due out until September.
The Bottom Line on F Stock
Positive macro catalysts, along with the release of new vehicles by Ford, should lift F stock meaningfully by the end of the year. But given GM’s superiority in autonomous driving electric vehicles, GM stock looks like a much better bet for growth investors.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace since 2015. Among his highly successful, contrarian picks have been airlines, oil stocks, and Lyft. You can reach him on StockTwits at @larryramer. As of this writing, Larry Ramer did not own shares of any of the aforementioned securities.