Ford Motor Company (F) was first incorporated in 1903, and over the past 118 years, it has grown into one of the world’s largest automakers.
The company runs a solid financing business along with its core Manufacturing segment, which produces a mass collection of cars, trucks, and SUVs.
Ford is expected to produce nearly $130 billion in revenues in FY 2021, with the auto industry likely to recover as the pandemic’s restrictions and overall effects ease.
After steeply declining in the midst of last year’s panic sell-off, Ford’s stock didn’t just recover fully, but rallied considerably higher from its pre-pandemic levels.
At around $15.73, Ford is trading at a seven-year high level, with investors seemingly the most confident they have been in a long time. I am neutral on the stock. (See Analysts’ Top Stocks on TipRanks)
The Opportunity
Ford’s ambitious EV plans include a $30-billion investment through 2025 to transform its plants, and deliver 30 new EV models to market by that time. In fact, a few of these models are already deliverable, such as the Mustang Mach-E SUV.
Along with various EV models that are expected to launch in FY 2022, the market likely remains excited about the F-150 Lightning, the all-electric variant of the company’s top-selling pickup truck.
Further, the company is making preparations to launch the E-Transit, Ford’s initial attempt to capture market share in the commercial EV space.
Luckily for Ford, the market seems to have received these vehicles well. The F-150 Lightning, the Ford Maverick, and the E-Transit have 130,000, 100,000, and 24,000 reservations, respectively.
Assuming Ford’s EV plan works out, the company may be able to capture a noteworthy market share in the industry.
Analysts expect the company to deliver sales of $128.2 billion this year, which are set to grow in the mid-single digits in the medium term, while EPS should land at $1.56 in FY 2021 with double-digit growth prospects moving forward.
Risks Remain
While the EV space has been around for a while, we don’t know who the long-term winners will be. Tesla (TSLA), regardless of whether one is bullish or bearish on the stock, certainly has an advantage, while many other startups in the space seem ready to charge, like Lucid Group (LCID).
Further, with a net debt position of $123.1 billion, even if the company ends up producing the above profitability estimates, it’s quite likely that investors won’t see any meaningful returns while the company deleverages.
This again adds another long-term risk, as even if the company is successful in the short-to-medium term, nobody can guarantee sustainable profits thereafter in what is certainly a cyclical industry.
Wall Street’s Take
Turning to Wall Street, Ford Motor has a Moderate Buy consensus rating, based on five Buys, four Holds, and one Sell assigned in the past three months. At $15.73, the average Ford Motor price target implies no upside potential.
Disclosure: At the time of publication, Nikolaos Sismanis did not have a position in any of the securities mentioned in this article.
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