Ford (NYSE:F) has been in turnaround mode. After hitting rock bottom in 2020, Ford (and F stock) have been making big moves. The company’s new CEO promised a “year of action” in 2021 as Ford accelerated its electric vehicle (EV) plans. It wasn’t just talk.
In 2021, the company announced a battery-powered version of its most important vehicle, the F-150 pickup truck. Progress on the F-150 Lightning ignited confidence in the company and its prospects in an EV world. As a result, Ford stock staged a 136% rally through 2021, hitting levels not seen in two decades.
While many stocks — including some EV makers — had a rough start to 2022, Ford started the year off strong. By mid-month Ford shares had gained another 21%. However, three things have conspired to hit F stock over the past week.
At $20.65, Ford has effectively given back its 2022 gains. Some might hit pause on the stock at this point, or even think about taking their profits and running. So far as I’m concerned, the events of the past week have opened up an opportunity to grab Ford shares on the cheap.
Here’s what’s happened.
Lower Sales and Revised Full-Year Guidance Whack F Stock
The events that have spooked the market around Ford kicked off on Jan. 5. The company announced that the global shortage in semiconductors combined with lingering supply chain bottlenecks had impacted its fourth quarter sales. That resulted in the company selling 1,905,955 vehicles in 2021, down 6.8% compared to the year before.
F stock was down on the news, but recovered the next day. However, that news introduced some wariness around the company. The situation worsened on Jan. 18, when Ford announced “special items” that will impact its full year 2021 earnings. These resulted in lower full-year 2021 operating profit guidance.
Analysis published by Barron’s explained that the change is essentially a case of Ford moving money around, but the resulting confusion was enough to send F stock to its biggest single-day loss since last April.
The bad news wasn’t over for Ford shareholders. In the latest blow, Jefferies analyst Philippe Houchois downgraded Ford stock last Wednesday. While he actually raised his price target from $20 to $25, Houchois downgraded his rating from “buy” to “hold.” His reasoning? While he is happy with Ford’s progress and leadership, he doesn’t feel it deserves the kind of valuation multiples that EV stocks enjoy.
Bottom Line on Ford
Jefferies’ Philippe Houchois isn’t the only investment analyst who has taken more of a wait and see position on Ford for the moment. Checking with the investment analysts polled by CNN Money, the sentiment turned in favor of a consensus “hold” starting in mid-January. But it’s very close. And their median 12-month price target of $23 still offers 13.5% upside.
As for Portfolio Grader, the last time I wrote about F stock early in the new year, it scored an “A” rating. Despite last week’s headline-making downgrade and the impact that has had on Ford shares, the “A” rating remains.
While it may be true that Ford is not yet an EV company and, therefore, doesn’t deserve the higher valuation that EV company’s are seeing, it is well on its way.
This is a company that sold over 27,000 battery-powered Mustang Mach-E’s in 2021. I wouldn’t be quite so dismissive of the maker of the third top-selling EV in the country in 2021. Especially not when an EV version of the company’s top-selling vehicle of all time isn’t just coming in 2022, it has 200,000 reservations and its annual production target has already been bumped twice.
In other words, seize the opportunity.
Ford’s sales were down in the fourth quarter, but that was primarily the result of a chip shortage. It’s a temporary supply chain issue that’s affected virtually all auto makers to some degree. And it will pass. The change in the company’s 2021 guidance is a matter of moving money around. As for last week’s Jeffries downgrade and resulting slip, it just makes Ford shares even more tempting.
Don’t miss the chance to buy F stock on the dip before “Lightning in a bottle” has them back on track.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place