Why is everyone talking about Ford Stock?


Although the computer chip shortage destroyed third-quarter auto sales by dropping third-quarter auto sales, the market is still finding investment in Ford (NYSE: F) be intriguing.

Ford’s sales for the period were affected like most others, but it was in fact able to exceed expectations and management says sales improved as the quarter progressed. Because the automaker has continued to dominate the truck market as well, and sales of its electric vehicles are increasing, it’s no wonder everyone is talking about Ford’s stock.

Image source: Ford.

Ford refuel

The seasonally adjusted annual rate (SAAR) of sales has fallen to just 12.2 million units, or about 27% below the 16.7 million vehicles sold in 2020, but analysts predict it will drop to 15, 5 million vehicles by the end of the year. The lack of computer chips means it will still be below last year’s total.

Cars and trucks are under construction, but they remain in storage yards until the computer chips arrive and can be plugged in. This may already be the case at Ford.

The automaker’s September sales jumped 34% from August, leading analysts to believe Ford may have received a supply of chips it was able to install. This would have allowed him to move the vehicles to lots of dealers where they were quickly bought.

The automaker said it sold more than 156,600 vehicles last month, more than half of which were trucks, bringing the third quarter total to 400,843 vehicles (cumulative total sales of 1.33 million are down 6.7% from last year). Sales of F-Series trucks amounted to a sale of less than 172,800, comfortably ahead General Motors Silverado sales of 123,067 and Stellantis Ram Truck Sales of 121,704.

The performance led Cox Automotive executive analyst Michelle Krebs to say that not only did Ford end the period stronger than it started, but it is now starting the fourth quarter “with an offer a little better than the third quarter and better than some of its main competitors. “

Ford said it began the fourth quarter with 236,000 vehicles in its inventory, 21,000 more than it had a month earlier.

While this is significantly lower than last year’s numbers, it puts Ford well ahead of most of the competition and at least gives it a temporary competitive advantage of having vehicles in stock that consumers can buy. It has 42 days of new stock, which gives it a cushion compared to Hyundai (39 days), Nissan (27 days), Chevy (26 days) and Honda and Toyota (both only 17 days).

The upcoming category killer

While this is promising, what people are really watching are Ford’s EV sales. The automaker said it hit a new record, with sales of its entire electric vehicle fleet increasing 92% in September from a year ago to 9,150 vehicles.

Equally impressive, sales of the Mustang Mach-E increased 9.2% for the month to 1,578 vehicles. Ford has been right to boast that it has sold a total of 18,855 Mach-E to date, placing the electric vehicle second after You’re hereof the Model Y in sales of fully electric SUVs.

Ford also noted that reservations for its upcoming F-150 Lightning had increased from 100,000 to 150,000 by the end of the second quarter. While reservations aren’t sales, the automaker has had good conversion rates from reservations to deliveries on the Mach-E.

Some 50,000 electric Mustang reservations were made during the order period, or 100% of expected production for the first year, which Ford said it expects to fill in the first 12 months of sales. So there is good reason to believe that the electric pickup will do just as well.

Ford could move further away from its truck competition when the F-150s hit dealerships, although chip shortages may delay when that happens. Still, that will be before GM has its Silverado EV pickup on dealer lots (not expected until 2023) or the Dodge EV Ram is released (expected in 2024), and more muscular manufacturing capabilities and Ford’s dealer network gives it the edge even though Rivian is already starting to deliver its R1T.

In the bumps and bumps section

Because the automaker’s shares are trading at deeply discounted valuations despite doubling in price over the past year, they represent a great opportunity for investors to buy ahead of the market, realizing they have mispriced. their actions.

Ford shares are only 8 times earnings, and as Wall Street expects it to grow those earnings at an incredible compound rate of 72% per year over the next five years, shares only trade for a small fraction of that growth rate.

While that sounds like a crazy and ambitious projection, it does suggest that while Ford is succeeding slightly in its approach and only achieving part of what analysts think, its valuation has room for significant expansion.

Look, Ford has vastly underperformed the general market index in terms of total return for decades. He’s been a horrible laggard, but about three years ago he started outperforming the S&P 500, although this year he’s really widened the gap. The auto market has changed and Ford is transforming with it, sometimes even in the lead.

It is now in an advantageous competitive position and has a head start – at least in some electric vehicle markets – which should benefit it and investors. And if Ford did eventually restore its dividend, it would increase the value of buying the automaker’s stock now.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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