Entering text into the input field will update the search result below

Ford Motor: Why You Should Buy The Post-Earnings Dip

May 03, 2021 8:47 AM ETFord Motor Company (F) Stock78 Comments
The Asian Investor profile picture
The Asian Investor


  • Ford’s sales are roaring back, and Ford could be a winner as the US economy reopens.
  • Ford faces supplier problems in Japan and a chip shortage which will hurt FY 2021 production.
  • Chip supply problems and a related decline in output are short-term problems that don’t impact Ford’s long-term outlook.

2020 Ford F-150 Pickup Trucks
Photo by shaunl/iStock Unreleased via Getty Images

Despite delivering results last week that outpaced expectations, Ford Motor's (NYSE:F) stock dipped due to concerns over constrained chip supply and production headwinds in 2021. The 9% drop last week is not warranted

This article was written by

The Asian Investor profile picture
I look for high-risk, high-reward situations. Five largest portfolio holdings: Bitcoin, SoFi, Alibaba, PayPal, Western Alliance. Early buyer of cryptocurrencies. I live in Thailand :)

Analyst’s Disclosure: I am/we are long F. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (78)

vooch profile picture
Full Disclosure =

Tdot has scared me with his doom and gloom regarding the impact of chip shortage AND commodity price increases sooooooo I have sold 20% of my beloved Ford stake over the last few weeks.

The MaiTai model still holds, but when the authority speaks it pays to listen (once in a while)
RickJensen profile picture
For someone who claims to be looking into the future, you just caved.....
$60??? What happened.
vooch profile picture

Tdot made me nervous with all his 2Q doom and gloom. I still have a big F position.

My entire portfolio is up like silly numbers over last few years. That makes me nervous. So, I‘m also looking to take a little winnings off the table. I also lightened up some other positions.

Still believe $60 by 31Dec2023.
RickJensen profile picture
You should have sold some puts.
ronald61239 profile picture
Can U imagine what the fleet auto sales will be like.. Car rental going for $600. for two day rrental & up.
Tdot profile picture
Actually rental car companies have been buying up used cars coming off leases to replenish their fleets for half off the original sticker price. Rental companies can be expected to compete for the rental car business (with competitive pricing) once families resume vacation travelling in the post-COVID world, and around holidays.

Meanwhile, businesses negotiate corporate rates with rental car companies, and that probably constitutes the majority of travel right now. And frankly, business travel expenses are tax deductible, so the costs are less important.

But yes, Rental Car Company "A" could in principle charge $300 per day, right up until Rental Car Company "B" drops their rate to $250, and then Rental Car Company "C" reduces their rate to $200, and then Rental Car Company "D" reduces it to $150, and so forth.

And just in random checking, Hertz is currently charging around $100 per day at McCarron Airport in Las Vegas, for typical rental cars reserved 2 weeks in advance.
ronald61239 profile picture
@Tdot ---It reads like your saying, there willl be no big demand for new fleet auto's when the chip shortage is over. I disagree.
My comment had nothing to do with cost of renting a vehicle. But to show there is a shorrtage of vehicles.
Tdot profile picture
No, I never said any such thing. I am simply stating that rental car agencies, which sold off most of their airport fleets to the auctions and used car dealerships during the COVID travel shutdowns, and are now seeing resurgent traveling and demand for rental cars.

They are now buying up whatever they can find, and right now it is the same sort of vehicles that they sold off before: gently used cars at the dealerships and lease car returns at auctions, since new vehicles are in short supply with the chip shortages.

Once the chip shortage is over and production and inventories start to rise, then the rental car agencies can start to negotiate with the automakers for bulk fleet discounts to replace their aging high mileage cars at the airports, assuming there are customers lining up for them.

As for your statement "My comment had nothing to do with cost of renting a vehicle", your exact comment was "Car rental going for $600. for two day rrental & up." [sic]. I don't know how that can be interpreted in any other way than having to do with the "cost of renting a vehicle".
I will continue holding but will not add to my position until Q2 earnings presentation unless F management gives us positive chip update before end of quarter. That 50% production reduction scares the you know what out of me.

Why would the 50% in planned reduction scare you?

Obviously it is a hit to earnings. But unlike most anything that hits earnings, the problem is clear and you can see how the issue will resolve itself in relatively short time. As a long term investor there are plenty of things that worry me more about Ford than the chip shortage.
ronald61239 profile picture
@Stewart Foreman ---I agree it's not the 50% not sold. it's the 50% (I'm thinking more) that will be sold. They will carry high margins.
Controlling cost, that is what matters. If U follow what Ivan had to say, Ford is moving their shop closing to June & call him back in July the 3rd. Qt. Reducing cost in the 2nd. Qt.
@Stewart Foreman If all the car manufacturers will be down 50% I will not be concerned but it is looking like F is in the worse shape by far. I love Fords new vehicles but you can not sell what you can not produce. I will continue holding for next couple of years, but short term I like GM and VW better.
Risk Advisor profile picture

With respect to Ford's First Quarter 2021 Report, the Company earned $341 million (EBIT) in Europe, due primarily to profitable sales of commercial vans and other products other than Focus, Fiesta, and Mondeo, which is being discontinued in the first quarter of 2022. China had a net loss of $15 million (EBIT),with year over year improvement thanks in part to high end SUVS and Lincoln. IMG Group was profitable in all markets except India. Please review this Report for details.
Tdot profile picture
I don't understand your question. Are you contradicting something?
RickJensen profile picture
Buy low.
(That would be now, if you don't already have a full position)
You could wait for Q2, but that's a 50/50 gamble.
RickJensen profile picture
Of slightly more use, is that F will very likely be testing the first SSB module that they will vendor certify for use. Now just about no one knows this, so imagine what it will be when people figure out F will have/has a SSB. In 2022, maybe in a vehicle by 2025.

Also, EOY may just have a big SAAR surprise.

Then when they bring back the divi. (Don't do it too soon). The stock will pop.
Warrior2323 profile picture
@RickJensen can consider if it is around $9
RickJensen profile picture
Good luck with that.
Ford has everything going for it. And some infrastructure money might come. When will the dividend come back?
Tdot profile picture
"Ford has everything going for it ... When will the dividend come back?"

Not any time soon. Their 1Q Free Cash Flow, which would be the source for dividends and such, was negative $400 million. And their guidance for 2Q is virtually catastrophic due to chip shortages taking out half the production. Their full year outlook is for negative $3 billion in free cash flow impact.
The Asian Investor profile picture
@Vlmed Like Tdot said below, given the production problems and negative FCF impact, I don't expect the dividend to come back. And I would want to buy Ford purely because of its dividend but its recovery potential once production problems are resolved.
The Asian Investor profile picture
Thank you @Tdot. The dividend will not come back, surely not in FY 2021.
Risk Advisor profile picture
The author states that Ford now assumes it will lose 10% of planned second half 2021 production due to chips shortages. This of course is acceptable if it involves the chips for the Focus, Fiesta, and Mondeo in Europe, the Fox 2021 in China, the Ford Figo and Figo Aspire, and EcoSport in India, all of which lose money on every sale, provided further Ford receives all the chips necessary to produce every F Series in the USA. All wishful thinking.
Tdot profile picture
Risk - you are arbitrarily assuming that Ford loses money on Focus, Fiesta, and Mondeo in Europe, the Fox 2021 in China, the Ford Figo and Figo Aspire, and EcoSport in India, and you are dead wrong.

Ford reported that they earned $500 million in Europe, $200 million in China, and $200 million in India and the other international markets.
Chris Lau profile picture
$F is almost ripe for buying more.
Not quite.
Wait a few points before buying the stock.
renog profile picture
@Chris Lau do you imply a future drop in stock price?
The Asian Investor profile picture
@Chris Lau How low do you think F will drop? I think it is already a bargain...
Warrior2323 profile picture
@The Asian Investor potentially back to $9
TBurch125 profile picture
Enjoyed the article. I have family that are in Engineering at Ford and for the first time in years, they are excited about the direction the new leadership is taking Ford.
@TBurch I am glad they are excited as I am excited about Fords product releases. We finally get great products and now we can not produce them.
I am very positive on Ford for 2nd half of 2021 and 2022 but I am greatly worried about production in Q2 and I worry if that will extend later into 2021 and 2022.
So everyone knows the three items you raised at the opening; therefore all tis information is priced in. So what is the UNKNOWN catalyst that will drive the growth of the stock?
ronald61239 profile picture
@LPeter ---A strong economy.
The Asian Investor profile picture
@LPeter I don't think the production recovery is priced in ... what is priced in is the production drop.
Tdot profile picture
Exactly. If Ford shows a $2 billion loss as projected in the 2Q due to production cuts for a lack of chips, that can be expected to leave a nasty mark on the share price.
Great article - enjoy your previous content as well
The Asian Investor profile picture
@johntus00 Thank you so much. What companies do you invest in?
@The Asian Investor also have a handfull of KMI call contracts :)
The Asian Investor profile picture
@johntus00 Kinder Morgan is a great American energy company. I like the business, how it is run and I also have it in my portfolio :)
Thanks for the article. I was hoping for your thoughts on the future value of Ford stock.
vooch profile picture
@Cassidy Run

He missed MaaS and Argo AI and the solid state battery investments and Rivan - but other than that he dead right about Ford. MaiTais to the Moon :)
@The Asian Investor In what time frame, please?
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About F

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on F

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.