Ford Motor (F) shares jumped more than 2.5% on June 2, after the automaker detailed expansion plans that struck a chord with investors. Ford is getting deeper into the electric vehicle (EV) business in a challenge to market leader Tesla (TSLA), but it is not abandoning its conventional gas-powered vehicle business yet.
The company plans to invest $3.7 billion in its U.S. factories to expand its manufacturing capacity for both internal combustion engine (ICE) vehicles and EV models. Ford aims to produce two million EVs for the global market annually by 2026.
As Ford details expansion plans, the company is also taking steps to avoid labor challenges getting in its way. The automaker plans to add 6,200 union factory jobs, a plan that also includes transitioning some 3,000 temporary workers to full-time roles. It also plans to boost perks for its employees, including offering hourly workers healthcare benefits from the first day of work. Ford has labor negotiations coming up in 2023.
Ford Gains Market Share
Ford’s U.S. market share increased 3.5% year-over-year in May to 13.5%. While U.S. new vehicle sales fell 30% year-over-year in May, Ford’s sales only dipped 4.5%. That was an encouraging performance considering that industry headwinds such as chip shortages have persisted. The company’s EV business is particularly doing well, with EV unit sales rising 221.5% year-over-year in May.
Ford’s strategy to counter global chip shortages has been to prioritize production of more profitable high-end vehicle models. In the video below, we talk about other factors that are enabling Ford to fare better than its competitors in these challenging times for the auto industry.
Wall Street’s Take
On June 2, Citigroup analyst Itay Michaeli reiterated a Hold rating on Ford stock. However, citing uncertainties in the U.S. auto scene, the analyst lowered the price target on the stock from $18 to $15, which implies an 8% upside potential.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating, based on seven Buys, nine Holds, and one Sell. The average Ford price forecast of $19.13 implies 38% upside potential to current levels. Shares have declined about 35% year-to-date.
Blogger Opinions
TipRanks data shows that financial blogger opinions are 88% Bullish on Ford, compared to a sector average of 67%.
Key Takeaway for Investors
Ford has a market lead in vehicle categories such as pickup trucks and vans. Therefore, it has a great opportunity to leverage its popular brands such as the Transit delivery van in the EV segment to drive rapid sales growth. Additionally, the labor friendly actions Ford is taking should help it avert potential labor disputes that could disrupt its production and lead to lost sales.
Read full Disclosure
