Shares of old-time automobile manufacturer Ford (F) have corrected in a vicious way, now down about 36% from their $25 and charge per share peak hit back in January. Despite the abruptness of the sell-off, the EV boom still appears to be very much on the table.
Did Ford stock get ahead of itself amid its epic bull run? Definitely, but the stock has come back to Earth, making it an intriguing long-term “electrification” play following its sudden valuation reset. I’m bullish.
It’s hard to believe that Ford, a historic $66-billion company, is worth less than a tenth of Tesla (TSLA).
Ford is a worthy foe, now that it’s shifting gears (forgive the pun) to capitalize on the EV boom.
Ford Stock: Getting Ridiculously Cheap
The long-term trend still looks robust for Ford. The EV market is growing rapidly, and Ford is a contender to capture a nice chunk of the pie.
Ford may not be on Tesla’s level as far as tech is concerned, but it looks positioned to catch up rather nicely. Currently, the stock trades like a traditional automaker at a meager 0.5 times sales and 3.7 times trailing earnings.
Either Ford stock is a value trap, or it’s not being valued by the markets properly.
Ford Model e: The Real Growth Engine
Many fans of combustion engines would never dream about buying a Tesla. An American icon like Ford may be able to grab the share of such an audience who may not be as reluctant to make the jump to electric as many analysts may think.
For the most reluctant to go electric, Ford will be there with its combustion business, as it looks to cater to the needs of its growing EV roster. Ford’s combustion business is still humming, but there are reasons for EV investors to be encouraged by comments made by CEO Jim Farley at last month’s investor conference.
The company is disconnecting its electric (Ford Model e) and combustion (Ford Blue) businesses, given their striking differences. Indeed, the divorce could allow the company to improve its electrification focus, as it gradually winds down its combustion business in accordance with demand over time.
The separation could also allow the company to provide greater clarity with the performance of the two divisions.
Wall Street’s Take
According to TipRanks’ rating consensus, F stock comes in as a Moderate Buy. Out of 15 analyst ratings, there are seven Buy recommendations, six Hold recommendations and two Sell recommendations.
The average Ford price target is $23, implying an upside of 38.3%. Analyst price targets range from a low of $13 per share to a high of $30 per share.
Bottom Line
Ford is right on the money to put a divide between combustion and electric businesses. Moving forward, I’d look for the firm to put the foot on the gas on Model e, while gradually pulling the brakes on Ford Blue over the next five years.
Undoubtedly, Model e will become more Tesla-like with time, as it looks to pressure Tesla’s sales with a wider and more enticing selection of options under the Model e banner.
In the meantime, it’s all about the chip shortage and supply chain constraints that are preventing Ford from being all that it can be. In time, such headwinds will fade, and F stock will be ready to rally.
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