Companies must evolve and adapt in order to stay competitive. Ford Motor (NYSE:F) is a case in point, as the old automaker is successfully transitioning into a clean-energy business and, in the process, providing enhanced value and confidence to F stock holders.
That should be the headline story, but there will always be distractions on Wall Street. In particular, it’s been reported that CEO Jim Farley has considered spinning off Ford’s electric vehicle (EV) operations from the company’s legacy, internal combustion engine (ICE) focused business.
Alternatively, it’s been suggested that Ford might spin the legacy business off from the EV business. Before you jump into the trade based on any of this, however, it’s important to get the full story.
Besides, a business-segment separation isn’t needed to construct a powerful bullish thesis for Ford. Spin-off or no spin-off, Ford’s value proposition is rock-solid and the company’s growth plan ought to put the skeptics at ease.
A Closer Look at F Stock
Since Ford appointed Jim Farley as its new CEO on Oct. 1 of last year, F stock has been on a wild and crazy ride.
Specifically, the stock rallied from $14 in early October to a 52-week high of $25.87 in January 2022. Then, Wall Street started to rotate out of so-called “growth stocks” and Ford was suddenly on the chopping block.
That’s not necessarily a bad thing, though. F stock corrected to $18 in mid-February, thereby giving current and new investors a decent entry point for a long position.
After that pullback, Ford’s trailing 12-month price-to-earnings ratio was unbelievably low at just 4.05. This indicates a true bargain that value hunters should be salivating over right about now.
Plus, Ford offers a forward annual dividend yield of 2.28%, so income-focused investors can consider this the icing on the cake.
Highly Unlikely
Maybe those statistics didn’t catch your attention because you’re still thinking about the possibility of Ford separating its EV and ICE businesses.
That’s perfectly understandable. However, it’s important to trade the confirmed facts, not what people think might happen.
Not to burst anyone’s bubble, but Ford reportedly declined to comment on the speculation. Furthermore, the company added a prior statement saying, “We have no plans to spin off our battery electric-vehicle business or our traditional ICE business.”
Also throwing a wet blanket on the spin-off speculation – while also leaving the door slightly open – was Benchmark analyst Mike Ward.
“Highly unlikely but you always have to explore… Unions, dealers, R&D assets, and manufacturing footprint are the biggest hurdles,” Ward posited.
Breaking Constraints
A different statement from Ford should remind investors of a better reason to consider an investment.
In particular: “We’re focused on carrying out our Ford+ plan to transform the company and thrive in this new era of electric and connected vehicles.” The Ford+ plan includes spending more than $30 billion on EVs by 2030.
Not long ago, Ford issued a release detailing the company’s strategic progress of the Ford+ plan. Evidently, Ford is executing on that plan quite successfully.
As Farley pointed out, Ford has ordered/reserved “more than 275,000 all-electric Mustang Mach-E SUVs, F-150 Lightning pickups and
E-Transit commercial vehicles.”
Farley added that Ford is “breaking constraints to deliver every one of them as fast as we can.” The implication, of course, is that the company can barely keep up with the demand for these vehicles.
Additionally, Farley stated that Ford will double its worldwide EV manufacturing capacity to at least 600,000 units by 2023. No doubt about it: Ford+ is among the most ambitious plans of any EV manufacturer today.
The Bottom Line
As an investor, it’s exciting to consider the possibilities. Yet, it’s best to make one’s decisions based on confirmed facts and evidence.
275,000 vehicle orders/reservations is an eye-opening figure. Ford’s blueprint for EV-market success is ambitious, yes, but it’s working out well so far.
And, let’s not forget about F stock’s low valuation and decent dividend yield. Ultimately, Ford doesn’t need to enact any spin-offs to prove its case as an American automaker to invest in.
On the date of publication, David Moadel did not have (either directly or indirectly) any 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.
