Ford Motor Company (NYSE:F) shares have been in a rut for for the past two weeks after a promising start to 2021. F stock began the year with a two-day 17% gain. By Jan. 14 it had closed at $25.19, but that would prove to be its 2022 high to this point. Now trading at around $19, shares are worth less than they were at end of 2021. That’s a letdown for investors who saw F stock rally 136% through 2021, hitting levels not seen in two decades. Canny investors will see this dip for the opportunity it is.
The company’s new (in 2020) CEO is clearly proving to be effective in turning the company around. Electric Vehicles (EVs) have gone from the talking stage to being the priority for the company. Ford still gets occasional downgrades (I wrote about one last week), but the days of F stock having junk status are in the rearview mirror. In fact, Ford shares now score an “A” in Portfolio Grader. One cause for optimism about the long-term growth prospects for F stock?
Pre-orders. more accurately, the fact the company has had to stop accepting reservations for some vehicles.
Ford Stopped Taking Reservations for Popular New Vehicles
When Ford announced the Mustang Mach E at the end of 2019, it was a big milestone for the company. The new EV SUV was the opening salvo in the automaker’s pivot toward electrification. By March 2020, the company had 43,000 pre-orders for the Mustang Mach E. With a planned production run of 50,000 units for the year, that was a pretty solid start.
The strong pre-order demand has translated into sustained strong demand for the Ford EV. The company is now planning to ramp up production to 200,000 units per year by 2023.
The biggest news for Ford shareholders in 2021 was the announcement of the F-150 Lightning. This is an all-electric version of the company’s most important product, the F-150 pickup. In December, the company announced it had to stop taking reservations for the F-150 Lightning after 200,000 customers had put down their $100 deposit.
The scenario was repeated this week when Ford had to stop taking pre-orders for the Maverick. This highly anticipated compact pickup truck isn’t an EV, but offers a fuel-sipping hybrid version, a city-friendly design, and an affordable starting price. After unveiling the Maverick last year, Ford quickly racked up 100,000 pre-orders. Mavericks are now shipping, but on Monday the company announced it has stopped taking pre-orders for the pickup’s 2022 model year.
Yesterday, Ford’s CEO noted that the company already has 10,000 pre-orders on the books for its new E-Transit battery-powered delivery van. Reservations are still open for that vehicle, but the trend is clear: Ford can’t keep up with the strong demand for its latest vehicles. That demand bodes well for the long-term growth prospects of F stock.
Is This Because of Supply Chain Issues, or Actual Demand?
Before getting too excited about pre-orders reaching the point Ford has to stop taking them, there’s an important question to be asked. Are we seeing the effect of strong demand? Or, is Ford shutting down pre-orders because it can’t get enough computer chips to make the vehicles?
While supply chain is undoubtedly a factor, popularity also seems to be a key driver of the demand. In a CNN interview, Autotrader.com executive editor Brian Moody attributed the halt of Maverick pre-orders to being a combination of supply chain issues and the new pickup being more popular than Ford had expected.
Comparing the pre-order numbers to past production volume of popular vehicles, it seems pretty clear that Ford has some hits on its hands.
For example, the Mustang Mach E’s production target is now 200,000 units per year in 2023. In comparison, in 2019 — before the pandemic disrupted production — Ford produced just over 99,000 Mustangs. If you compare against its SUVs, the Ford Edge is comparable to the Mustang Mach E in terms of size. Ford made just under 172,000 of those. The 200,000 F-150 Lightning pre-orders compare to the nearly 705,000 F-150s the company manufactured in 2019.
Considering the fact that EVs made up just 4% of U.S. auto sales in 2021, those pre-order numbers are pretty impressive. As for the Ford Maverick pickup truck, the closest comparison is the Ranger mid-sized pickup truck. Slotted between the Maverick and F-150, the Ranger remains in production. In 2019, the company produced about 135,000 Rangers.
While some of the new EVs and the new Maverick are bound to cannibalize sales from other Ford products, the takeaway is positive. Ford has strong demand for its latest vehicles. Remember, these are just pre-orders. There will also be traditional sales on the dealership lots.
Bottom Line on F Stock
In the short term, swirling questions about interest rates, inflation, and chip shortages may continue to have a negative impact on F stock. But with high demand for its latest products and its EV models proving to be incredibly popular, the Ford comeback story remains compelling.
Ford shares that are down nearly 9% so far in 2022 are an opportunity to invest now and enjoy the long-term growth.
On the date of publication, Louis Navellier had a long position in F. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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