Say the phrase electric vehicle (EV) stock, and scores of richly priced, early-stage growth names likely come to mind. But those aren’t the only types of stocks out there that can provide EV exposure to your portfolio. A prime example of that is Ford (NYSE:F) stock.
Yes, I know you may be thinking, “Wait, Ford?”
That is, you think this “old school” Detroit automaker is a name likely to be disrupted by electrification trends. Yet in recent years, reading the writing on the wall about its industry’s future, it has smartly begun to make the pivot.
Yes, it’s only in the early stages of this historic change in its product mix. You may believe that well-known EV makers that have been all-electric from day one have the advantage. But given its brand equity, existing infrastructure and manufacturing expertise, I wouldn’t discount its chances.
That’s true even after its big run-up in price, since it began to reposition itself as an EV play. Yet with its valuation more than reasonable, and the fact it already has a solid, profitable business, this is a great play for investors who are looking for EV exposure, but are too cautious to buy pure plays in the space.
F Stock the EV Catalyst
Last year, we saw Ford Motor Company ramp up dissemination of its EV game plan. Back in February, the automaker announced its plans to invest $29 billion into its EV and autonomous vehicle (AV) efforts over the next 4 years.
This development gave further fuel to the pandemic-related recovery for F stock. Starting off the year at $8.50 per share, the stock made it to $15 per share by June. However, shortly after that, with the global chip shortage affecting operations, the stock fell back, then moved sideways through the summer and early fall.
Then, as a new wave of “EV Mania” emerged among Main Street and Wall Street investors in October, Ford joined the ride. As a result, shares made another big leap, up to $20 per share. That’s a price level Ford hadn’t hit in over 20 years!
To some, the stock’s more than 129% jump in 2021 may seem like too much, too fast, given it has only started to move into EVs. However, considering that, even at today’s prices, its valuation is far from frothy, I wouldn’t say that its “EV catalyst” is fully baked into its valuation.
Not Quite ‘Priced for Perfection’
Just looking at the steep rise in the F stock price since January, it may seem like it’s too late to jump into it. Yet if you look closely at the details, it’s clear many more runway remains.
First off, consider its valuation at today’s prices. Based on its trailing twelve month (TTM) results, Ford trades for 28.3x earnings. Yes, not exactly “cheap” at first glance, as this automaker has historically traded at much lower multiples. Still, as sell-side estimates calling for it to earn $1.99 per share next year (implying a forward P/E of 10.2x), valuation does not look stretched. Trading at such a low multiple, this is an EV play even dyed-in-the-wool value investors can like.
Second, the excitement that’s building for Ford’s EV plans is justified, given its strong chances of succeeding with this transformation. Like I mentioned above, it has the brand power, as well as the means and know-how to successfully produce and sell electric cars and trucks on a mass scale. Those aspects may actually be the ones that are much harder to replicate. In other words, it’s still uncertain whether EV upstarts can successfully scale into Ford-sized automakers.
Third, in the coming year, the company could start seeing its first bit of success as an EV maker. As I discussed earlier this month, it plans to deliver its first all-electric F-150 pickups in 2022. This event could help signal the legacy car maker has what it takes to stay ahead of the disruptors. In turn, this could help spark even more enthusiasm for shares.
The Verdict on Ford
Earning an “A” in my Portfolio Grader, there’s another aspect to F stock besides its low valuation that should make it appealing to more cautious investors.
That’s the fact you get ownership in already established business, while you wait for its EV transformation to happen. This established business also comes with a non-EV catalyst, the possible end to global chip shortage in 2022. An end to the chip shortage could also help jolt returns over the next 12 months.
A solid EV stock, and a solid stock overall, F stock remains a buy. That’s true even after its recent price acceleration.
On the date of publication, Louis Navellier had a long position in F stock. 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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