Cheap is a big, loaded word when you’re investing.
There are “cheap stocks” – not necessarily penny stocks, but inexpensive to own – and then there are “cheap” stocks, undervalued, and going for less than their real value.
They’re not often one and the same, but sometimes – every “once in a blue moon,” like the song says – you get a stock that’s cheap in every sense of the word.
That’s the kind of stock I’ve got picked out for you today – an undervalued, unappreciated contender in the red-hot electric vehicle (EV) space you can snap up for less than the cost of a pizza.
Here’s everything you need to know…
The First Big “Elec-Truck” Is Close
To be crystal clear, I’m not recommending Tesla Inc. (NASDAQ: TSLA) – the headline says “cheap stock” after all. But in a sense, Tesla is the also-ran in this story.
Elon Musk made a big splash in 2019 when he unveiled plans for the Tesla “Cybertruck,” which Musk all but assured us would be the world’s very first road-going all-electric truck.
Tesla’s cars are, by and large, pretty sweet-looking rides, but the Cybertruck was almost… brutal. All-steel construction, sharp angles, high ground clearance. It’s tough to dispute matters of taste, and I’m sure there are some people who thought it looked striking, but to me it looked like something the Terminator would tool around the ruins in, blasting away at errant humans. I mean, it was out there.
The Cybertruck was supposed to be “coming to a dealer near you” in 2021… until it wasn’t. Tesla fell further and further behind on the timeline until, just last month, it announced the launch would be postponed until “sometime in 2022.” Tesla claims to have over 1 million reservations for the Cybertruck, but “reservations” and sales are two very different things, and we don’t know for sure how much of that is real.
And so the real first electric truck will likely come from none other than Ford Motor Co. (NYSE: F). You know, the same Ford that’s been around for 118 years? Ford has announced a much more concrete release date of Q1/2022 for its Ford F-150 all-electric “Lightning” pickup truck.
Whereas the Cybertruck had a, shall we say, “head-turning” style, to put it politely, the F-150 Lightning looks… well… like a Ford F-150. The F-150 is all but ubiquitous on American roads; Ford’s sold between 820,000 and 1.2 million of them a year going back to 2005, and it’s been the top-selling American truck for something like four decades now. Ford already sells a hybrid F-150, so it’s not a stretch for most customers to go all-electric with it.
As for the Lightning itself, well, it’s a little sleeker than its gas-gulping stablemates, but aside from that, its wheels, and its front lighting, I’m hard-pressed to spot too many external differences to the regular, internal combustion engine-powered 2021 models. I’m sure the Lightning will have a “LIGHTNING” badge slapped somewhere on the body, but it’s immediately clear Ford’s offering will have much more mass-market appeal.
Ford has already booked more than 120,000 reservations for its all-electric pickup.
There Are More Reasons to Own This Stock
The Lightning seems to have been carefully calibrated to get the company into the EV market at a 45-degree angle. The manufacturer’s suggested retail price (MSRP), as it stands now, comes in a couple hundred bucks cheaper than the gas-powered models, and the base model “starting price” qualifies it for a raft of U.S. and state tax incentives.
Ford is not, however, putting all its EV eggs in the Lightning’s basket. It currently has three consumer EVs – one full electric and two hybrids. Its all-electric crossover Mustang Mach-E electric sport utility vehicle (SUV), the aforementioned F-150 hybrid, and the Escape hybrid.
On the backend, Ford just made a $50 million investment in Redwood Materials, a Nevada EV battery recycler… founded by a former Tesla exec, no less.
This move is designed to fortify Ford’s battery supply chain before it needs to be fortified. Redwood’s technology can recover more than 95% of the nickel, cobalt, lithium, and copper in dead batteries, and you’d better believe Ford will need every gram of that stuff back in its supply chain; the company is projecting 40% of its sales to be EVs by 2030, which will be right around the time a global supply crunch of battery metals explodes. Ford is inking deals with Volkswagen to access global EV markets in countries where, unlike the United States, people haven’t grown up immersed in Ford since infancy, and it’s taken positions in Argo, a self-driving software company, and Rivian, a company that makes electric “adventure vehicles.” Those companies are valued at $7.2 billion and $80 billion, respectively, and they’re prime candidates for IPO action; Ford would get a significant windfall in such a situation.
If you look “under the hood” – get it? – of Ford, you see all kinds of value; regular earnings surprises, EBIT guidance boosted by 50%, attractive discounted cash flow… it goes on.
The thing that screams “CHEAP!” though, is Ford’s trailing 12-month price/earnings ratio (P/E ttm). Today, that number sits just above 6.5. Now, I’m almost old enough to remember a time when 6.5 would’ve had value investors looking elsewhere, but nowadays, it’s a different story. That’s nearly seven times lower than the average P/E of the stock market, and nearly three times lower than the P/E of the entire domestic auto industry.
Thirteen dollars and change is, frankly, a ridiculously low price to pay for owning a piece of all this potential and a company in the EV catbird seat. This is a stock that by all rights should cost more than $20 right now.
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Source: Money Morning