Stock Analysis & Ideas

Ford Stock’s Ferocious Comeback Will Likely Continue

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As Ford stock bounces hard off of the lows, it may seem sensible to wait for the next pullback. However, waiting may not be the best decision, as Ford just reaffirmed its status as an estimate topper and a dividend darling.

Ford stock (F) has been on a powerful run since it bottomed out near $11 last month. This doesn’t necessarily mean that the rally is finished, however. There’s likely more room to run, as Ford’s recently reported results affirm the company’s fiscal strength. I am bullish on Ford stock.

Ford is a classic American automaker. In some ways, Ford’s financial health is a good gauge of how the U.S. economy is doing overall. If Ford is thriving, that’s a positive sign. When Ford is struggling, however, this suggests that the American economy may be in rough shape.

In this context, Ford’s recently issued second-quarter 2022 financial results have implications beyond the company itself. Is the American consumer willing and able to buy a new vehicle despite the challenges of inflation and a possible recession? Thankfully, the answer is yes, as Ford topped Wall Street’s expectations and delivered outstanding quarterly numbers – and with that, it looks like Ford stock still has plenty of gas left in the tank.

It’s Still Not Too Late to Consider Buying Ford Stock

It’s probably tempting to think that you missed out on a terrific opportunity. After all, Ford stock recently bottomed near $11 before rocketing to $15 in just a couple of weeks. It was spectacular to watch Ford stock go up 3% to 5% day after day, but it was undoubtedly disappointing if you were sitting on the sidelines. Still, it’s not too late to think about making your move as an investor.

First of all, consider how much higher Ford stock can move from here. It was worth $25 earlier this year, so there’s a “gap to fill,” as market technicians like to say. Furthermore, just because a stock has moved higher recently, this doesn’t necessarily mean that it’s expensive. Currently, Ford’s trailing 12-month price-to-earnings (P/E) ratio is 5.2x, which is extremely low, so there’s little need to worry about Ford stock being overvalued now.

Meanwhile, income-focused investors should be glad to know that Ford offers a forward annual dividend yield of 2.61%. Moreover, the company said it plans to increase its quarterly dividend to $0.15 per share. This represents a significant milestone, as this dividend will be the amount that Ford paid prior to the onset of the COVID-19 pandemic.

Also, this is a great time to consider an investment in Ford, as the company is in the middle of a crucial transition. Specifically, the automaker is reorganizing into three separate but related businesses. These will be Ford Blue, a segment dedicated to internal combustion engine (ICE) vehicle production; Model e, which will be Ford’s electric vehicle (EV) business; and Ford Pro, the company’s fleet unit.

This clearly isn’t the Ford of previous generations. The company now plans to produce two million EVs by the end of 2026. So really, you didn’t “miss the bus” if you’re just buying Ford stock now. Ford is just turning the page now to its next chapter, which could involve robust EV sales but also a strong focus on ICE vehicles and fleets.

Ford’s Financial Results Should Reassure Investors

To reiterate, Ford’s Q2-2022 results were high stakes because they’re a gauge of how the nation’s economy is doing. It’s great news, then, that Ford knocked it out of the park with terrific top and bottom-line results. Investors ought to feel reassured that Ford is in excellent shape as a business and can remain confident that Ford stock has a good chance of continuing to move higher over the long term.

Starting with the top line, Ford reported $37.91 billion in second-quarter 2022 revenue, a vast improvement over the $24.13 billion from the year-earlier quarter. This result also beat the consensus estimate of $34.32 billion.

Focusing on the bottom-line results, Ford posted $667 million in net income, a substantial increase over the $561 million reported in 2021’s second quarter. Additionally, Ford’s adjusted earnings per share (EPS) of $0.68 demonstrated a vast improvement over the year-earlier quarter’s $0.12 while also easily beating the consensus estimate of $0.45.

On top of all that, Ford improved its capital position. The company had cash, cash equivalents, and restricted cash totaling $26.16 billion at the end of Q2 2022. This figure is better than the $20.13 billion that Ford had reported at the end of 2021’s second quarter.

Wall Street’s Take on Ford Stock

Turning to Wall Street, Ford has a Hold consensus rating based on five Buys, 11 Holds, and one Sell assigned in the past three months. The average Ford price target is $16.08, implying 6.1% upside potential.

Don’t Obsess About Timing if Thinking about Buying Ford Stock

There’s an old saying among investors: Focus on “time in the market,” not “timing the market.” If you sit on the sidelines for too long, waiting for a perfect entry point with Ford stock, you may end up missing out on substantial gains. Instead of profits, you’d only have regrets.

Instead, consider the value proposition as Ford stock trades at an ultra-low valuation multiple. Besides, Ford is transitioning into a diversified automaker, and the company’s Street-beating quarterly results speak for themselves. So, don’t be afraid to consider looking into Ford stock.


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