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Buy Into the Transformation of Ford as an EV Maker

Things appear to be going from good to great for Ford (NYSE:F) stock.

2022 Ford (F stock) F-150 Lightning Lariat
Source: Ford

If there’s a market downturn going on, nobody told the Detroit automaker whose shares have risen 6% since Jan. 4 and are up 11% over the last month. The most recent gains bring F stock’s appreciation over the past 12 months to 155%.

In January 2021, the stock was trading at $9 per share. Over the course of 2021, Ford’s return for investors trounced the gains achieved by rivals General Motors (NYSE:GM), which rose 41%, and Tesla (NASDAQ:TSLA), which climbed 50% higher last year.

And as most automakers around the world have struggled with an ongoing semiconductor shortage and supply constraints, Ford shares have continued their bull run and now trade at a level they haven’t been at in 20 years.

Turning A Corner

The turnaround in F stock comes after years of pain for shareholders. The company struggled mightily to revamp its operations, moving away from unprofitable sedans and focusing almost exclusively on its best-selling trucks and SUVs. Ford has also gone all-in on electric vehicles, a decision that required the company to spend more than $11 billion refurbishing its production plants.

The Herculean turnaround effort led to several senior management shake-ups and multiple chief executive officers as the company’s share price slid 66% between January 2017 and March 2020 when markets sold off as a global pandemic was declared.

At its trough, Ford shares were in penny stock territory at $4.24. But now, patient investors are being rewarded as Ford successfully comes out of its multi-year turnaround strategy as a leader in the electric vehicle space. The company and its current CEO Jim Farley, who took the helm in October 2020, have smartly focused on developing electric versions of some of Ford’s most popular and iconic vehicles, including the F-150 pick-up truck and Mustang muscle car.

Ford recently announced plans to double its annual production capacity of the F-150 Lightning fully electric pick-up to 150,000 vehicles a year in order to meet demand.

Strong Sales

Ford’s sales and financials have also turned a corner over the past year despite a global shortage of semiconductors that has hobbled other automakers and hurt their production. The company recently announced that its worldwide sales in this year’s fourth quarter totaled 508,451 vehicles, a 27% increase over the previous third quarter and much better than the 3% quarterly decline that Wall Street analysts had forecast.

The 11% rally in F stock over the last month has been largely driven by the automaker’s stellar fourth-quarter results. Ford’s inventory increased by 22,000 vehicles in December from November, which was caused by the global chip shortage. However, investors have chosen to focus on the Q4 sales figures.

Perhaps most impressive, Ford has beaten its archrival GM to become the second best-selling automaker of electric vehicles behind industry leader Tesla. Ford sold 27,140 of its Mustang Mach-E electric muscle car, eclipsing the 24,828 sales total of GM’s bestselling Chevrolet Bolt electric sedan. Tesla remains the EV leader by a wide margin, having sold a record 936,172 electric vehicles around the globe last year. But Ford is quickly gaining market share in the increasingly competitive race to retire the combustion engine.

The electric vehicle market is forecast to grow at a compound annual growth rate of 27% between now and 2026 when sales are expected to reach $725.14 billion, according to market research firm Reportlinker. Ford aims to capture a good share of that market, ramping up production capacity of all its electric vehicles to 600,000 units globally by 2023 and introducing new electric vehicle models that include the E-Transit cargo van.

Ride F Stock to Profits

Ford has proven to be one of the best turnaround stories in corporate America and its stock continues to be one of the best performing on the markets today. And, at less than $25, shares are still affordable for most investors.

While the share price has run far in the past 12 months, it could run higher if the company continues to successfully execute on its electric vehicle strategy and beat the quarterly sales projections set by Wall Street. Benchmark investment bank raised its price target on Ford to $29 from $24 and maintained its “buy” rating on the stock, saying the share price has more room to run.

F stock is a buy.

On the date of publication, Joel Baglole held a long position in GM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/01/f-stock-buy-into-the-transformation-of-ford-as-an-ev-maker/.

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