- Ford Motor Company (F) was on the receiving end of an analyst downgrade, sending F stock down again.
- The market reaction means F stock lost 1.5% over the past 5 days.
- F stock is taking a hit because of a short-term supply issue, making shares at the lowest price of 2022 a tempting opportunity.
Ford Motor Company (NYSE:F) investors were already having a disappointing week, when things got just a little bit worse. On April 7, Barclays Capital downgraded F stock to “equal weight.” Along with that came a slashed price target, down to $17. The market reaction was swift, with Ford shares taking a beating on Thursday before rallying slightly to end the day at $14.96 for a nearly 3% drop.
The reason for the Barclays downgrade was concern that Ford is vulnerable to the ongoing shortage of semiconductors. In addition, Barclays warned that other supply chain disruptions, the rising price of oil (and gasoline) and potential consumer weakness due to factors like inflation added to the worries about Ford’s ability to perform. Ford wasn’t the only automaker to be singled out by Barclays, but that was small comfort for investors.
After Thursday’s dip, F stock is down almost 30% for 2022.
| Ticker | Company | Current Price |
| F | Ford Motor Company | $15.37 |
The Chip Shortage Is Hurting Ford, But the Pain Won’t Last Forever
The primary factor cited by Barclays was the global chip shortage. Without a doubt, that is a concern. The damage done to automakers like Ford by the lack of chips in cars has been huge. It was estimated that in 2021, Ford’s North American production alone took a 700,000 unit hit because the company couldn’t source enough chips.
There’s a misconception that chip shortages are taking a bigger toll on electric vehicles than traditional vehicles. However, a typical car can now have more than 3,000 chips. All vehicles are being affected. Making the situation worse is the fact that despite the number of chips in a car, automakers are actually a very small percentage of chipmakers’ business. So when production is constrained, who is a chipmaker going to prioritize? Smartphone makers that make up half its business, or automakers that might represent 3% of total sales?
That puts automakers like Ford in a tough position. Thus, the downgrade to F stock.
However, painful as it is, this situation is not permanent. Chipmakers are ramping up capacity. It takes time to build new semiconductor fabrication plants, but it’s happening. And in the meantime, automakers are learning new ways to mitigate the damage. For example, Ford is now selling vehicles that have certain non-critical systems disabled. Buyers will be able to bring them into their dealership within a year to have necessary chips installed to enable the functions. It’s not a perfect solution, but it means Ford assembly plants don’t have to idle and consumers can get their hands on new vehicles.
In the long-term, the chip shortage should cease to be a problem.
Ford Shareholders Have a Lot to Look Forward To
If the chip shortage was just pouring more misery on a struggling company — like the Ford of 2020 — I would stay away. But this is a Ford that is positioned to be a force in the high-growth EV industry. It stopped pre-orders for its upcoming F150 Lighting battery-powered pickup truck after hitting 200,000. The Ford Mustang Mach-E topped the Consumers Reports list as the top electric vehicle for 2022. The Mustang Mach-E won accolades from both buyers and testers. It was also the third-biggest EV seller of 2021, with Ford’s American customers snapping up 27,140 of the sporty EVs.
The company is crushing it with non-electric sales as well. The F150 pickup remained America’s top-selling vehicle for the 40th straight year in 2021. Compared to other pickup trucks instead of all vehicles, the streak is 45 years. The company’s latest release is the Maverick compact pickup and it is already turning into a big hit.
Should You Buy F Stock After This Analyst Downgrade?
The Barclays downgrade reflects real operational concerns for Ford. It’s not a company that I would be betting on for short-term gains — there is bound to be continued volatility. However, this isn’t the Ford of 2020 that saw the company’s credit rating reduced to junk status.
Even with the operational challenges it faces, F stock earns a “B” rating in Portfolio Grader. The company’s long-term prospects make F stock at 2022 lows well worth considering for a growth-focused portfolio.
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.
