Ford (NYSE:F) stock is getting pretty interesting these days — and it’s a little confusing. Long an afterthought amid other more attention-grabbing names in the space, F stock dipped into penny-stock territory early last year, falling to less than $5 at the onset of the pandemic. Now, though, Ford is making a run at relevancy, even though it seems to be stumbling over itself in the process.
Currently, the stock is enjoying a firecracker beginning to the year, up nearly 40% so far in 2021. Recent earnings knocked it out of the park.
Maybe more importantly, though, Ford is making a hard turn toward electric vehicles (EVs). The legacy Detroit automaker plans to make the switch to selling all-electric cars in Europe by 2030. U.S. sales surely won’t be far behind. Ford even recently announced plans for an electric version of its popular F-150 pickup truck.
All in all, F stock is gearing up to full speed. Now the question is this: can it keep up this momentum?
F Stock at a Glance
Today, F stock is trading at a little over $12 per share and has built a market capitalization of $48.8 billion. In fact, the company is trading near the top end of its 52-week range and appears set to challenge that mark at some point this year.
That said, Ford’s first-quarter earnings report provided mixed messages to investors.
For the quarter, total auto revenue came in at $33.6 billion, easily topping the $32.23 billion that analysts had expected. Earnings per share (EPS) were also a pleasant surprise, registering 89 cents versus analysts’ estimates of 21 cents. The company also had adjusted pretax profits of $4.8 billion and adjusted net income of $3.3 billion, “which was its best since 2011.”
However, the problem came from what analysts called “confusing” guidance for 2021. Like other automakers, Ford is currently challenged by a shortage of semiconductors needed to build new cars. Because of this, Ford said it would lose 1.1 million units of production in 2021. It also has 22,000 partially finished vehicles which will be completed and shipped once more chips become available. CEO Jim Farley noted the following about the development:
“There are more whitewater moments ahead for us that we have to navigate […] The semiconductor shortage and the impact to production will get worse before it gets better.”
For its full-year guidance, Ford had previously estimated $8 billion to $9 billion in earnings. Now factoring in the shortage, it estimates that somewhere between $1 billion and $2.5 billion will be clipped from earnings. That would make for earnings between $5.5 billion and $6.5 billion.
Analysts like Joseph Spak of RBC Capital called this guidance a “bit unclear,” however, as it does no clarify if these problems are particular to Ford or part of a broader challenge facing the industry. Bank of America Global Research analyst John Murphy echoed this concern. F stock fell nearly 10% immediately after the earnings report, in part because of that vagueness.
So, obviously Ford has some work to do in future quarters in terms of managing analyst expectations. If it’s not giving clear guidance, then the market will not react well.
Ford and Electric Vehicles
All of this confusion aside, though, there are still reasons to like F stock.
Not so long ago, Ford was known for its classic muscle cars — the Mustang, the Ford Fairlane Torino and the Talladega to name a few. Its F-150 model has also been the best-selling pickup in the U.S. for “more than four decades.”
However, electric vehicles are now the wave of the future. In response, Ford is adapting so that it isn’t left behind. In addition to its plans to offer an electric European fleet by 2030, Ford is also investing $22 billion in EVs through 2025 (as well as an additional $7 billion in autonomous vehicles).
What’s more, the company sold 11,172 electric cars in April, which was a 262% increase over the year-ago period. It is also rolling out an all-electric version of the popular F-150 — the Ford F-150 Lightning — which will begin production next spring.
Projections from data provider IHS Markit now estimate that 15% of all vehicles sold in 2025 will be electric. Plus, that number will increase to 23% by 2030. Clearly, there’s a huge opportunity for Ford and other automakers here — and the former is being no slouch about it.
Bottom Line on F Stock
As you probably know, there are a lot of interesting EV companies trading on Wall Street now. The challenge for most of them is to create buzz and name recognition while spending massive amounts of capital to build factories and scale up production.
Ford has already solved many of those problems. It has name recognition, it has a workforce and it has the production facilities. Will its customers make the transition from gasoline-powered muscle cars, SUVs and pickups to Ford’s upcoming lineup of EVs?
That’s for you to assess. If so, though, F stock may be worth holding onto in the near future. Assuming, of course, that it can avoid confusing the market even more in the process.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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