Ford Stock Price Rises 3% – Time to Buy F Stock?

Ford (F) stock was trading almost 3% higher in US premarket price action today. The stock is up 66% so far in the year and is outperforming the markets by a wide margin.

Legacy automakers have outperformed in 2021 even as pure-play electric vehicle (EV) stocks continue to sag. What’s the forecast for F stock and is it a good buy in September 2021?

Ford stock technical analysis

Ford stock is looking bullish on the charts. Earlier this month, it crossed above the 50-day SMA (simple moving average) and has since continued to strengthen. It also trades above the 100-day and 200-day SMA. After the rally over the last week, the stock also trades above the short-term moving averages like the 10-day, 20-day, and 30-day SMA. The 14-day RSI (relative strength index) is 63, which is a neutral indicator. The MACD (moving average convergence divergence) gives a buy signal.

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F stock recent developments

Over the last year, Ford has doubled down on its investments in electric cars and autonomous technology. Under the leadership of its CEO Jim Farley the company has been aggressively pivoting towards zero-emission cars. While the company hasn’t yet put a hard deadline for selling ICE (internal combustion engine) cars in the US like General Motors, it has said that by 2030 it will sell only EVs in Europe.

Now, Ford has said that along with SK Innovation, it will invest $11.4 billion towards EV and battery plants. Notably, the battery is the most important hardware element of an electric car. A higher battery range helps increase the range and also acts as a competitive advantage. Tesla has mostly led the race for the higher range. However, Lucid Air is set to have a higher range than the Tesla Model S Plaid model.

Ford is investing in electric cars

“This is a transformative moment where Ford will lead America’s transition to electric vehicles and usher in a new era of clean, carbon-neutral manufacturing,” said Ford Executive Chair Bill Ford on the company’s electric vehicle plans. He added, “With this investment and a spirit of innovation, we can achieve goals once thought mutually exclusive – protect our planet, build great electric vehicles Americans will love and contribute to our nation’s prosperity.”

Jim Farley

Under Farley, who has led Ford for almost a year now, the company has been working “Ford+” turnaround plan. It has exited several international markets including India. The company has rather been focusing on the profitable models in key markets in a bid to structurally improve the margins. Also, it has been working to launch all-electric models of its best-selling models.

Next year, we’ll get the F-150 all-electric model. The ICE version of the F-150 has been America’s best-selling pickup for over three decades. The model will compete with Endurance pickup from Lordstown and Cybertruck from Tesla. Meanwhile, the launch of Cybertruck has been delayed amid supply chain issues.

F stock price forecast September

Wall Street analysts have a mixed forecast for F stock. It has received 13 buys, nine holds, and one sell rating from the analysts polled by CNN Business. The stock has a median target price of $16.65 which is a premium of 17.5% over current prices. The street high target price of $18 is a premium of 27% over current prices.

Earlier this month, Wells Fargo lowered Ford’s target price to $17 from $18 while maintaining a buy rating. In July, Bank of America had boosted its target price on F stock to a street high of $18.

Ford stock long term forecast

The long-term forecast for Ford stock looks positive amid the pivot towards electric cars. Commenting on the pivot, Bill Ford said “When we came out with the Mustang Mach-E and then the F-150 Lightning, I think it really surprised a lot of people. Not just the fact that we came out with those vehicles but frankly how good they were.” He added, “I think you’re starting to see that in the investor base. Really, that’s the tip of the iceberg though.”

The one thing that may work in legacy automakers’ favor is the manufacturing expertise and an established sales and service network. Many of the startup EV companies have faltered on the execution part. However, with decades of manufacturing experience under the belt, legacy automakers score above startup EV companies.

Meanwhile, pure-play EV companies have been touting their attractive product proposition. Looking at the initial response to electric models from legacy automakers, the game is wide open and pure-play EV companies would not have a cakewalk.

Analysts polled by TIKR expect Ford’s revenues to rise 9.6% in 2021 and 20.4% in 2022. This year, the chip shortage situation would shave off billions from the company’s top line as well as the bottomline.

Ford dividend

Ford had suspended the dividend last year, as did General Motors. While startup EV companies don’t pay a dividend, and won’t pay one anytime soon, a lot of Ford investors might want a resumption of the dividend. Commenting on the dividend restoration Bill Ford said, “We’re looking at doing it as soon as we possibly can.” He added, “We have a very large portion of employee and retiree ownership, and they care deeply about the dividend as well.”

Should you buy F stock

Ford stock trades at an NTM (next-12 months) PE multiple of 8.65x which looks quite attractive. Also, from an absolute valuation perspective. Its market cap is below that of NIO. There is a scope for expansion of Ford’s valuation multiples. As Ford scales up the deliveries of electric cars, the stock could see a rerating of valuation multiples. Looking at the tepid valuations and the strong growth outlook, F looks like a good buy at these prices.

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