Due to the onset of the novel coronavirus and other factors, 2020 wasn’t such a smooth ride for Ford Motor (NYSE:F) shareholders. As Ford stock tests the long-term investor’s patience, it might be tempting to sell one’s shares and move on to something more exciting.
I would ask that the stockholders consider giving the trade some time to work in their favor. Granted, Ford stock isn’t posting gains like you might have seen in electric-vehicle stocks.
But ever since Ford appointed Jim Farley as its new CEO on Oct. 1 of last year, there’s been a renewed sense of hope and enthusiasm surrounding the company and the stock.
Besides, some of the company’s recently reported data suggests that Ford may be in transformation mode. We’ll certainly delve into the specifics of that, but first let’s conduct a quick analysis of the price history of Ford stock.
A Closer Look at Ford Stock
Interestingly, we could divide the price action of Ford stock into two phases. Those phases could be called “before Farley” and “after Farley.”
Prior to Farley’s installation as Ford’s CEO in early October, the Ford stock price was basically stuck in neutral. From June through September, there was zero progress as Ford shares stayed near the $7 level.
Making the situation even more frustrating was the fact that Ford had suspended its dividend payouts to the shareholders in March. That must have been irritating to long-term stockholders. After all, Ford had been a reliable dividend payer for a quite a while prior to that.
Then October came with what I will hereby call the “Farley effect.” No man can rescue Ford all by himself. Yet, it’s probably not a coincidence that Ford stock immediately started moving higher after Farley took the CEO position.
By early February, hope-fueled buyers managed to push Ford stock past the $11 price point. It should be noted, though, that the share price has been much higher than that.
Investing in the Future
Perhaps someday the bulls can get Ford stock back up to $17, where it was at one point in 2014. That’s a worthy long-term goal as new leadership offers hope for continued success.
In order to make that happen, Ford can’t stay on the same path that it went down in past years. Fortunately, Farley and his company are willing to set Ford on a radically new course.
That course involves bold plans to invest in electric and autonomous cars. In fact, Ford recently expressed intentions to nearly double its investments in electric and self-driving vehicles.
Clearly, this isn’t the Ford that your grandparents might have invested in. It’s encouraging to see an old company learning some new tricks and keeping up with important automotive trends.
Getting Serious
There’s no question that Ford is serious about expanding into electric and self-driving cars.
Anyone who doubts this should note that the company plans to invest $29 billion in those segments, including $22 billion for electric vehicles (EVs), through the year 2025.
These figures say a lot about Farley’s commitment to taking Ford to the next level. As Deutsche Bank analyst Emmanuel Rosner puts it, Farley “is truly accelerating the company’s transformation towards an electrified and connected future.”
RBC Capital analyst Joseph Spak also chimed in, declaring that Ford is taking “bolder and more decisive action on EV (and AV).” AV stands for autonomous vehicle.
Spak added that Ford is “stepping up the investment” and that this move is “absolutely necessary.” I tend to concur and look forward to watching Ford’s transformation play out over the coming months and years.
The Bottom Line
New leadership can have a profound impact on a company and therefore on its share price.
With Farley at the helm, Ford is making big changes and Ford stock holders should expect to see substantial gains over the long term.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
