Ford: 5 Positives Among A Sea Of Negatives

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 |  About: Ford Motor Company (F)
by: Tradevestor

Summary

Recent events have further undermined a struggling stock.

But analyst upgrade, price target, and technical indicators support the undervalued thesis.

And the stock also seems range-bound for short-term traders to take advantage of.

Ford Motor (NYSE:F) has been in the news for a lot of not-so-positive reasons recently. April sales weren't impressive, and the departure of the revered CEO was confirmed. The company also halted product in Venezuela. Hence, it is no wonder that the stock has been almost flat YTD. However, this article presents a few reasons why Ford seems like a reasonable buy here. Let us get into the details.

April Sales: Wait, what? Did we not say April sales weren't impressive? Yes, but the report did have some positives as well. The all-important F-Series showed strength again, with a 7.4% gain YoY. Trucks tend to have bigger profit margins, and the strong numbers here should be encouraging for investors.

Lincoln sales showed signs of getting back to life in March, as covered here, but it would be too much to expect it to show strength in two consecutive months this early in its turnaround. In addition, April U.S numbers weren't terrible, keeping in mind that Ford has shown more strength in the U.K and China recently.

Price Target: Ford's average price target was in the $17 range for quite some time, but has now moved to $18.27, according to 14 analysts on Yahoo Finance. Morningstar, a website that many value investors love, has a fair value of $25 for Ford. To put that into perspective, other well-known dividend stocks like Altria Group (NYSE:MO) and AT&T (NYSE:T) are trading at or way above Morningstar's fair value.

Analyst Upgrade: Ford recently was upgraded by Craig-Hallum with a price target of $21. That represents more than 30% upside, without including dividends. And before investors brush off this upgrade as one from a fan boy, the same firm downgraded Ford toward the end of 2013.

Buyback: Ford announced after-hours that it was buying back 116 million shares. Although it seems like this buyback is mainly to offset shares granted to executives and conversion of convertible notes, it is nonetheless a positive move. As the chart below shows, Ford's float has been steadily going up, and this buyback would at least stop the uptrend, if not reduce the count.

(click to enlarge)Click to enlarge

(Source: YCharts.com)

Technical Indicator: Ford's undervalued theory is supported by technical reasons as well. The chart below shows Ford's relative strength index (RSI) at 30.04, which is the textbook level for being considered oversold.

(click to enlarge)Click to enlarge

(Source: Nasdaq.com)

Conclusion: Despite all these positives, Ford still seems stuck in its $15 to $16 trading level, as there have been equally powerful negatives impacting the stock. That said, we believe this stock is still fundamentally undervalued for the long term, and investors should carefully buy on dips. This stock is not only about potential capital gains, but a juicy 3.20% yield as well. Unless things go awry, investors can also expect a dividend increase toward the end of the year.

Disclosure: I am long MO, T.

Business relationship disclosure: The article was written by Tradevestor's analyst. Tradevestor is not receiving compensation for it (other than from Seeking Alpha). Tradevestor has no business relationship with any company whose stock is mentioned in this article.