After more than doubling this year, can Ford Motor (NYSE:F) stock continue running higher?
Analysts seem divided over whether F stock still has any gas left in the tank after a massive 133% year-to-date gain. At the start of 2021, Ford’s share price stood at $8.52. Today, the stock is changing hands at just under $20 a share. It’s been a dramatic turnaround for the Detroit-based automaker whose shares were in penny stock territory (defined as under $5) when the pandemic started in March 2020.
The impressive reversal has been largely due to Ford’s new focus on electric vehicles, as well as a senior leadership team that is committed to making the legendary American car company a true global leader in the automotive industry.
Big Ambitions
Senior management at Ford has not been shy about declaring their ambitions. Ford North America COO Lisa Drake recently declared that the company plans to become the world’s second-largest electric vehicle manufacturer within two years as it ramps up its production capacity to 600,000 EVs per year. That would put Ford behind only market leader Tesla (NASDAQ:TSLA) when it comes to electric vehicle output.
While assuming second place in the increasingly competitive electric vehicle sector is a lofty ambition, it is also a realistic one given the huge demand for the company’s all-electric F-150 Lightning pick-up truck, which has 200,000 pre-orders.
To be sure, Ford faces stiff competition from other established automakers such as General Motors (NYSE:GM) and Volkswagen (OTCMKTS:VWAGY), as well as a growing number of domestic and foreign start-ups. However, Ford is pulling out all the stops to position itself as a market leader in the EV space and a contender to dethrone Tesla from the top spot.
Ford’s efforts include building a new electric vehicle assembly plant in Tennessee, constructing two lithium-ion battery plants in Kentucky, rolling out electric versions of its most popular and enduring vehicles such as an all-electric Mustang muscle car and Transit Connect delivery van, and investing heavily in battery technology, including cutting edge solid state batteries that are expected to dramatically increase driving range and reduce charging times.
Ford CEO Jim Farley has said that the company’s current target of producing 600,000 EVs globally by 2023 is double the amount of electric vehicles the company had planned to produce over the next 24 months. In all, Ford is investing more than $11 billion in its electric vehicle production.
Overcoming Challenges
F stock has performed exceptionally well this year not only because of the company’s future plans but also because of its strong financial results. At the end of October, Ford printed third-quarter earnings that blew past Wall Street forecasts and issued much stronger forward guidance than had been anticipated. The company’s earnings per share came in at 51 cents per share compared to the 27 cents that had been expected. Ford’s Q3 revenue totaled $33.21 billion versus $32.54 billion that Wall Street had expected.
Looking ahead, Ford said it would reinstate its dividend that had been suspended early in the pandemic and lifted its full-year earnings guidance to $10.5 billion to $11.5 billion, up from previous guidance of $9 billion to $10 billion.
The blowout results led F stock to immediately rise 9%, adding to its gains for the year. The exceptional earnings were due to strong global demand for Ford’s vehicles as well as the company managing to overcome the challenges posed by the global semiconductor shortage that has led to production slowdowns at competing automakers such as GM.
Specifically, Ford entered into an arrangement with Malta, New York-based semiconductor supplier GlobalFoundries (NASDAQ:GFS) to collaborate on developing chips exclusively for Ford vehicles, and the two companies say they plan to explore expanding domestic chip production in the U.S. Ford has mused publicly about making its own semiconductor chips going forward.
Bet On F Stock
While Ford’s share price has run very far this year, there’s reason to believe the company can drive its stock even further in coming years. While the stock might need to take a breather, the company clearly has the ambitions and management team in place to achieve future sales targets and continue its current win streak.
Going all-in on electric vehicles seems to be the right strategy and Ford is backing up its ambitions with major investments that will enable the company to control its production in-house and lessen its reliance on foreign-sourced parts and supplies. With the electric vehicle revolution moving into high gear, Ford Motor Co. looks like a great bet.
F stock is a buy.
Disclosure: On the date of publication, Joel Baglole held a long position in GM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
