Ford Motor (F) began the new decade with optimism as it emerged from a fundamental corporate redesign to compete in the era of smart vehicles and clean energy. The automaker is investing heavily in new technologies to keep pace with competitors in the markets for autonomous vehicles, ride sharing and electric cars. But is Ford stock a buy now?
The unveiling of the Mustang Mach-E in November 2019 was a key milestone in the company’s pivot toward what former CEO James Hackett called “the digital future.” The Ford Mustang Mach-E, an all-electric crossover, recently made its commercial debut in the U.S., with European deliveries imminent. Ford is beginning production of the Mach-E in China as well. The Mach-E is a competitor to the Tesla Model Y.
This new future also includes a pivotal tech partnership with Alphabet-owned Google (GOOGL) and a slew of other new vehicle launches. Among them: a completely redesigned F-150 truck and resurrected Ford Bronco brand. Additional strategic partnerships include Volkswagen (VWAGY), Rivian and Mahindra to strengthen Ford’s global presence.
Ford stock is trending higher after a prolonged downtrend, along with peer General Motors (GM). If you’re thinking about buying shares of Ford, it’s key to analyze the fundamental and technical picture first.
Ford stock crumbled 9.4% after reporting Q1 earnings. A global chip shortage will force the automaker to reduce its second-quarter production by half.
Wall Street expected Ford to report earnings of 14 cents a share on revenue of $32.63 billion. Ford stock crushed those estimates in its latest disclosure, recording EPS of 89 cents per share on revenue of $33.55 billion.
Yet strong earnings were offset by news that Ford will cut its Q2 production levels by 50%. CEO Farley hinted that the chip shortage will get worse before the outlook improves.
“We believe our second quarter will be the trough for this year,” Farley said. “We have work to do to get our industry footprint back to firing on all cylinders.”
Ford Delivers Record EV Sales
Ford in early March reported record electric-vehicle sales in February, the first full month of sales for the Mustang Mach-E. The electric-crossover vehicle put a dent into Tesla’s Model Y U.S. market share.
Morgan Stanley analysts said in a note to investors on March 2 that the Ford Mustang Mach-E stole EV share from Tesla last month. “Tesla’s share fell to 69% from 81% the prior year,” the Morgan Stanley analysts wrote. “The Ford Mustang Mach-E accounted for nearly 100% of the share loss,” they said.
The automaker sold 3,739 Mustang Mach-E electric vehicles. Sales of the hybrid F-150 truck also boosted EV and hybrid sales last month to 9,267 units. That number is up 56% from a year ago.
Ford stock is performing much better than Tesla stock as of late.
Google Partnership Lifts Ford Stock
Key tech partnerships are part of Ford’s strategy as well. Ford stock gained 2.9% on Feb. 1 after CEO James Farley announced the 117-year old automaker is partnering with tech giant Google. The Michigan-based carmaker and Alphabet-owned company will form a new collaborative group called Team Upshift.
“We’re going to leverage the talent and assets of both companies to push the boundaries of Ford’s transformation,” Ford Motor wrote in a company blog post. “This may include projects ranging from modernizing our plants through vision AI, developing new retail experiences when buying a vehicle, creating new ownership offers based on connected vehicle data, and more.”
In addition to the joint venture, the deal will make Google the preferred cloud service for the Detroit automaker.
New Ford CEO Takes The Helm
On Oct. 1, COO James Farley took the helm as Ford’s CEO. His tenure began with a shake-up of key leadership roles. Ford announced Tim Stone is vacating his role as CFO. He was replaced by John Lawler, who recently oversaw Ford’s autonomous vehicle unit.
Along with Farley’s new position came a ramp-up in Ford’s intent to invest more in emerging technologies, including autonomous vehicles, electric cars and software-as-a-service capabilities. Ford stock investors have welcomed the changes, with shares almost doubling from last October through early February.
Farley stepped in after disappointing results in Hackett’s three-year bid to reshape the automaker. The centerpiece of Hackett’s tenure was an $11 billion restructuring plan. That plan ran into major roadblocks when Ford botched the redesign and launch of its popular Explorer SUV in 2019.
All in all, Ford stock declined roughly 60% during Hackett’s time as CEO.
In addition to C-suite changes, Ford announced last July it was resurrecting its iconic line of Ford Bronco SUVs. Production of the new Bronco lineup will include two-door and four-door models, as well as a smaller Bronco Sport edition. Consumers can now see some of the new Bronco models, set to hit showrooms in May 2021, online.
Bronco Relaunch Part Of New Strategy
The relaunch of the Bronco SUV — which was discontinued in 1996 — is part of Ford’s overall strategic initiative to capitalize on its iconic brand lineup to boost U.S. revenue and earnings.
Ford President of the Americas & International Markets Group Kumar Galhotra told CNBC last July he expects annual unit sales of the new Ford Bronco series to be “in the hundreds of thousands.” The Bronco SUV family is set to directly compete against the popular Jeep brand owned by Fiat Chrysler (FCAU).
The revival of the popular Bronco vehicle models came just weeks after the Detroit-based car company unveiled details of the latest version of its top-selling Ford F-150 pickup truck in late June. The truck is the first Ford vehicle to support over-the-air software updates, first pioneered by Tesla (TSLA) in 2012.
Ford Stock Fundamental Analysis
To determine whether Ford stock is a buy now, fundamental and technical analysis is key.
The IBD Stock Checkup tool shows Ford stock has an IBD Composite Rating of 81 out of a best-possible 99. The rating means Ford stock ranks very well vs. all stocks, in terms of the most important fundamental and technical stock-picking criteria.
Ford stock has an EPS Rating of 72 out of 99, which compares quarterly and annual earnings-per-share growth with all other stocks. While that score could be better, it has improved since the last quarterly report. Ford has a spotty earnings track record, with many quarters of earnings declines over the past decade. But forward-looking estimates are pointing to growth.
The rankings place the carmaker in the No. 2 spot vs. its automotive industry peers. Because of its huge run over the past year, a base-building Tesla (TSLA) still holds the No. 1 slot in IBD’s Auto Manufacturing industry group, which is No. 92 out of the 197 industry groups tracked by IBD. General Motors (GM) is ranked third.
Ford Stock Technical Analysis
Prior to its earnings gap-down, Ford stock was testing support at its 10-week line. Shares have gotten hit in recent weeks amid chip shortages affecting auto production.
The post-earnings action marks a decisive sell signal for position traders. Shares are on track to close more than 2% below their 10-week line. It’s the first decisive close below that level for Ford stock since its flat base breakout in mid-January.
It’s also important to consider Ford’s relative price performance vs. other stocks in the market. Ford’s Relative Strength Rating has improved alongside the stock’s share price gains. The RS Rating for Ford stock is now a 77. That means Ford has outperformed 77% of all stocks over the past year. Elite growth stocks boast much higher scores.
Ford’s relative strength line — which measures price performance vs. the S&P 500 — has pulled back from a short-term peak in mid-March.
Ford has underperformed the S&P 500 for the better part of the last decade. But looking at a monthly chart, Ford is now solidly above its 24-month moving average. Closes above that level for the past five months are a big step in the right direction.
Ford Stock: A Buy Right Now?
Ford stock is breaking above its long-term downtrend going back to 1999. Looking at the weekly chart, shares have made a big move off 2020 lows. But shares are now trading well below a key technical level, the 10-week line.
As for the fundamentals, Ford sales and profits are rebounding. The company is moving more into electric vehicles, too. However, chip shortages are weighing on Ford and the entire auto industry.
Bottom line: Ford stock is not a buy right now. It’s trading below its 10-week line after earnings. A weekly close of more than 2% below that level is a decisive sell signal for position traders who purchased the stock at the flat-base breakout in January.
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