Potential investors into Ford Motor Company (NYSE:F) stock should first and foremost view its chart trend line. Long-term, value-driven, fundamental investors should be quick to see that there is little reason to buy Ford shares.
Ford stock is simply on a long downward trend. During the longest bull market in history the company’s shares went down almost continuously. However, the winds of change are yet again promising a new day at Ford. However, the company could take a new direction. F stock may get spun off in a new direction in the future. If that happens, investors should really look at investing in such a venture.
Among the bigger changes at Ford are new management, and new vehicles. Current CEO Jim Hackett, will retire after leading the company since 2017. At Hackett’s inception on May 22, 2017 Ford stock closed at $11.10. Nearly three and a half years later it trades around $6.98. That equates to a 37% decline in shareholder value. Obviously not the way to go.
Current chief operating officer Jim Farley will take over effective Oct. 1. Perhaps he will lead a turnaround. Ford certainly needs to focus on operations as debt is a challenge it faces. However, prior to Jim Hackett, Ford was led by Mark Fields. As CEO, Fields presided over a similar erosion of shareholder equity during a nearly identical 3-year period.
The point here is that 2 leaders hand-picked to drive a turnaround at this giant vehicle multinational, couldn’t.
Ford is currently heavily reliant upon trucks and SUVs for sales. Of the 903,357 Ford vehicles sold in the first half of 2020, trucks and SUVs accounted for 89%.
Ford is promoting the idea that its Mustang Mach-E, Bronco, and F-150 will lead the company’s resurgence. This does seem to align with its current product strategy of trucks and electric vehicles.
However, take this with a grain of salt. Ford’s previous product shift strategy didn’t pan out. The company has focused on higher priced trucks and SUVs during the past decade without much success.
Early Bronco Demand
Yet, Ford may have a winner with its 2021 Bronco which has received lots of preliminary demand. According to Motor1.com, Ford has received 230,000 reservations for the 2021 Bronco(1). To put that into perspective, the Ford F-Series sold 233,787 units Q2 2019 and 180,825 in Q2 2020.
Further, Ford sold just over 300,000 SUVs in the first half of 2020. Should all 230,000 reservations be delivered, that would represent a massive spike in Ford’s SUV sales. Whether that is sustainable, and by how much that will shift stock prices remain unknowns. Nevertheless, demand numbers do look promising.
The Mustang Mach-E also looks to have strong demand. According to Carbuzz.com, the 2021 Mustang Mach-E looks to be sold out. Ford has limited its global production to 50,000 vehicles. Ford is certainly going to be moving toward a more EV heavy product mix, so this is good news.
The F-Series is also changing with the times. The trucks will have available hybrid engines which may provide a boost to sales of Ford’s already top-selling trucks.
However, just how much all of this goes toward turning around F stock prices is of course, anyone’s guess.
Ford’s Future is Clear
The company is looking toward a future that is truck, SUV, and EV oriented. American automakers have been able to reap high profits from SUVs and trucks in recent years. It is clear that Ford will use those profits to develop EV capability and products.
While EV mainstays like Tesla (NASDAQ:TSLA) and Nikola (NASDAQ:NKLA) have been able to easily raise capital through stock issuances, Ford has not. Thus, some analysts are suggesting that Ford and GM (NYSE:GM) may spin off their EV arms into independent subsidiaries. In this way Ford’s ice-vehicles sales wouldn’t subsidize EV growth. Further, investors would likely see much higher price appreciation in Ford EV only shares.
F stock is certainly getting more interesting with this new strategy. However, I wouldn’t purchase it now because the timeline for those ventures to affect the stock price are somewhat long. And even though demand for new models may be strong, I suspect they won’t move prices upward much in any case. Investors are still wary of traditional car manufacturer stocks. If Ford spins off an EV based stock, it’s a whole different ballgame.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.