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Ford: Not So Fast

Aug. 02, 2021 8:53 PM ETFord Motor Company (F)TSLA138 Comments
Pinxter Analytics profile picture
Pinxter Analytics


  • Ford has surged on behalf of prospects of its electrification of its vehicle fleet.
  • But as we saw with companies like Tesla, it will likely take years for them to see any profits from these vehicles and the room for error is slim.
  • As I examine the company's valuation and prospects, I find some bearish signs for their short-term valuation even as I remain cautiously bullish on their long-term prospects.

Ford F-350 Super Duty in Negev Desert
lermannika/iStock Editorial via Getty Images

Ford Motor Company (NYSE:F) has been taking in a lot of positive news lately after they released more details on their electrification process, in which they are converting current facilities to accommodate new electric

This article was written by

Pinxter Analytics profile picture
As part of my earnings growth strategy, I invest, trade and write about small under-covered growth companies which don't get much attention from establishment analysts as well as use the strategy to interpret short and long term moves in bigger, well established companies in the United States, Europe and the Asia-Pacific region.-All articles and the information in them are my opinion based on my own research and analysis and should not be taken as investment advice without proper due diligence and advice from a professional financial adviser.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of F, SHORT TSLA either through stock ownership, options, or other derivatives. 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.

Opinion, not investment advice.

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.

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Comments (138)

Interesting to re-read evaluations of Ford after the good results announced this week. Wonder if Pinxter has a fresh take and revised view?
Last week was a good time to add to Ford and I didn't...deployed dry powder elsewhere. I'd like to see it a buck lower but I'm long and deep Ford and will likely add tomorrow.
Any Ford or potential Ford investor should look at Sandy Munro's analysis of the EV space.

Here is a vid this week, where Sandy compares where Tesla is compared to other players, mostly MachE, ID4 and Tesla. Sandy talks about:

EV motors
FSD chip
Thermal management system

And where Tesla is ahead of Ford.

A cautionary tale to anybody considering F.

RickJensen profile picture
He said it was a great first try.
And he also doesn't understand why F designed the Mach-E the way they did. But I do. And if he knew what I know, he might just change his mind.
Tesla's toast, and that's why you are here.
I feel your fear.

BTW, how's it going now that Elon admits the Cybertruck might bomb and that the batteries he was developing and the FSD might not work??
Thank you for the very thoughtful answer.
Donald Johnson profile picture
@Keto4me What Tesla touts don't get is that there are lots of ways to make great autos. That's why there are so many auto makes and their margins are so poor.

Tesla no longer is the only show nor the only alternative. I never would buy anything from Elon Musk. I just bought two new Lincolns. I'm a Ford guy, not a Tesla guy.

And there are a heck of a lot more Ford, GM and Ram guys out there than Tesla, BMW and Volvo guys. It will stay that way, regardless.

I just took my profits in Ford. Looking to sell F puts after it corrects a bit.
estimates for F stock based on discounted cash flows make it a $23. dollar stock within a couple of years. what is your estimate of free cash flow?
EVs are cheaper to make (with the exception of current battery costs), then ICEs. As Lightenings get into the mix in 2022, margins should greatly improve.
@MtnTom and fewer moving parts, so lower warranty expenses in the long run too
Strong sales of traditional F-series trucks will continue for the next 10 - 20 years. Ford will be in a position to slowly transition it's F-series lineup to electric as the demand increases over time. Right now battery range fears (especially for commercial vehicles that may have towing needs), and lack of charging stations in rural parts of America will keep ICE sales strong for the coming years.
EV's will not be more than 5% of sales for years! the issues with charging stations being available along with charge times and add that home chargers take longer than 24 hours unless you have 220V (relative to a 120V line). To this barrel of hills to overcome short term, the green electric push grids cannot support all electric vehicles. Mercedes saying they'll be all electric by 2030 is fantasy. The upshot is FORD knows how to build and profit on gas vehicles and should be over $20 per share relatively soon.
Donald Johnson profile picture
I'm looking for Tesla sales and margins to shrink as quality companies bring electric vehicles to market.

Tesla is no Apple or Amazon. It doesn't have a lock on technology, buyers' loyalty, pricing power, manufacturing knowhow or technology.

A lot of buyers would rather buy from a local dealer than from Tesla, which is notorious for poor support.

If you want to pair, sell Tesla and buy the real auto makers.
@Donald Johnson a recipe for disaster is what you are recommending.just look at share price movements over last few years,what that would have got you .I have loved my ford‘s over the years,switched to Tesla a year ago.surprised and amazed how much money I am saving on gas,no service no spare parts so far.new over the air updates every week,leaves Tesla years ahead.it really is like Nokia and Apple in the old days.
Donald Johnson profile picture
@mr.S.G Having driven a friend's Tesla, I just bought two new Lincolns. Love them. Perfect fit, great comfort, professionally built, strong, smart dealers. Gas on every corner. No waits for charging. No worries about being caught waiting in line for a charge during long trips.

And nobody wants to steal them.

Most important, wife loves them.
Donald Johnson profile picture
I just took a short term profit on F because I don't know how politicians will screw up the economy to show that they are doing something about the Covic-19 and delta varian surges.

I'm looking to sell $12.50 or $13 puts, which would be a bullish trade.
I know a lot more people that will buy a ford electric than a tesla, next few years should be big for them
Risk Advisor profile picture
@mr clark

Please pass on the names to Ford.
@Risk Advisor Ford sales down 30% in July. August 1 backlogged inventory started flooding into dealerships. Ford has a number of exciting products this year alone: F150 Hybrid, Maverick mini-truck hybrid under $25K, brand new Bronco series. All these will sell like hotcakes. 3Q may be their best in decades. I'm long Ford AND Tesla. Wife bought a Tesla last year, I bought an F150 Hybrid this week.
Risk Advisor profile picture
@Rex B

Not sure what price you paid, but many dealerships, low on inventory, are selling F-Series at up to $5000 OVER sticker.
Ford Electric Sprinter Van + Rivian Partnership + Rivian deal with Amazon = Slap a Rivian bumper sticker on the new Ford ev Sprinter Van$ also = huge FLEET Deals not only with Amazon but other companies as well... imo
RickJensen profile picture
Did you really think that Rivian would be able to produce all those vehicles?
@RickJensen no Ford will in iny speculative opinion.
RickJensen profile picture
I may have misunderstood your point.
So if the profit margin of EV will eventually be similar to ICE production, how do you explain the sum of all the market caps of the automotive companies (including start-ups)??? Will total sales increase by 5x? Switching to EV will not, by itself, increase total sales volume or revenue. And ride sharing along with AV may reduce the number of cars sold.
Risk Advisor profile picture

Maybe it is all about pleasing Wall Street. Institutional investors comprise 25% to 30% of all daily trading of NYSE stocks everyday, and look how they value Tesla, and perhaps in the near future Rivian and Argo Al. Throw out all the traditional metrics (sales figures, historical p/e numbers free cash flows, etc). Maybe Wall Street is so mesmerized by what they think of autos and the effects on climate change, the numbers are irrelevant.
RickJensen profile picture
@Risk Advisor
Hedge funds are institutions.
Roscop123 profile picture
@Risk Advisor I think institutional trading is more like 70%
SaaS Sniper profile picture
@SaaS Sniper GM? Once bankrupt and screwed common shareholders when shares went to $0.00, remember? I don't care if it goes to $200, I'll never own it! Ford, however, prevailed then and didn't leave shareholders in the dirt! I'm not forgetting that!
SaaS Sniper profile picture
@kruncher You can look at historical and suggest past performance predicts future success but I won't.

One company has clearly burned or upset you but their earnings beats and execution have exceed that of F for a few years now. This much is not up for debate.
Risk Advisor profile picture

Is GM on their hands and knees begging you to own their stock?
DaveyDee profile picture
How about the Maverick's contribution to profits. Few are even in dealerships yet and the order book is overflowing. Far outpacing expectation.
Risk Advisor profile picture

Wonder how many buyers will be trading in their Honda Civics and Toyota Corollas, a key Ford objective for the development and sale of the Maverick.
DaveyDee profile picture
@Risk Advisor from what I’ve heard from dealerships posting on YouTube the number of nonFord owners placing reservations is on target. What excited him was the percentage asking for the hybrid. 40 mpg.
Risk Advisor profile picture

The starting prices are fantastic along with the standard hybrid engine. Taking some market share against Honda and Toyota for a change?
Got on the F bus at sub $6. I'm so long I got a pillow and a blanket. And im stretched out on the back seats, back of the bus!
Honestly, it's hard to make it through articles when right off the bat you have errors.

"Overall, it's unclear exactly what profit margin, if any, the new electric vehicle offerings from Ford will have"

Did you listen to Ford's latest earnings call before writing an article about them?

Also, why are you comparing them to Tesla, as if they are valued anywhere near the extremes that Tesla is? Tesla is valued like 50x Ford on P/E.
@Steve87 Took the words right from my mouth. I'm glad someone else caught that. The Mustang Mach-E is already turning a profit for the company. They announced this on their earnings call.
@coachc005 just a pity the sale numbers are so small.for a company like Ford ,absolutely irrelevant.I think their maximum is production of 50.000 a year,and as made in México will not be eligible for tax credits in USA.so at end of th day just advertising gimmick,sad really considering the potential.
@mr.S.G yeah, god forbid they make 50,000 of a type of car they've never made before in the first year. and sell them all. sounds like a huge problem.
An insightful, but inaccurate take on the manufacturing aspect. Building an electric vehicle is easier than an ICE vehicle. Ford has built 2 generations of electric vehicles on their existing lines already, so there is not an extensive refit of the plant / process that they are not already aware of. Ford's processes are far superior to Tesla (clearly obvious when you examine fit and finish of exterior and interior).
Tesla had never built a car when the germ of an idea was bubbling up in Musk’s head. F has been at it for over 100 years, changing factories to make new models, refreshed models and major updates. The lack of an ICE makes the process simpler. The battery thing is a hurdle, but as the author points out, sales for BEV’s won’t be 20 million annually on day one. Figuring out how many are in the pipeline before sales take place is a tricky business.

I have a lot more faith in F than in Elon Musk sleeping on a factory floor to get it started.
@brucesmith50 While you're not wrong, I don't want to see you crediting Musk for having the idea for an electric coupe. Eberhard and Tarpenning did all of that groundwork and have been muzzled by Musk's lawyers.
@brucesmith50 I don’t agree with everything Elon says or does.but it is time to say he has proven himself ,against all odds.I would always rather invest in a company where CEO has over 30% shares and options and income linked to stock performance.at Ford CEO can come and go,no emotional or large financial connection.
Risk Advisor profile picture

All true but he would probably have never made it without the incredible financial support of Wall Street and all the funding they have provided.

Until second quarter of this year almost all of his "profitability" came from the sale of EV credits. That said he will go down in history, not as the first entrepreneur to develop the electric vehicle (that honor goes to the 1915 Baker Electric) but the first to bring electric vehicles to the masses worldwide. He took on all the worldwide ICE vehicle manufacturers and it appears he will succeed, even if he requires more Wall Street money
Risk Advisor profile picture
Breaking News From Yesterday's Barclay's Conference

Ford's CFO says the company could reinstate its dividend by the end of the year. "We've had a really tough period of time here the last couple of years with Covid last year and now the chip shortage," CFO John Lawler says. "We plan to bring the dividend back as soon as we can...depending on how the second half goes with [computer] chips, it could be as early as the end of this year." Ford suspended its dividend in spring 2020 as the pandemic forced the closure of its North American factories.
RickJensen profile picture
@Risk Advisor
I suspected that 2022 Q1 and Q2 latest. Late this year, watch Dec. sales.

The problem with trying to evaluate what and when F will pay is why there is a forward and a historic P/E. Neither is not a good valuation of the stock (unless it gets crazy). It relates nothing about investor's sentiment. Profits and especially earnings are limited because they are so fungible. One should look at cash, cash burn, margins, expenses, CAPEX and strategic plans on expenses and structuring. F to cut 14K jobs, that is worth at least 1B to the bottom line.
That said forward P/E done well, that's where the potential for accuracy rests. It's just the projections, be hard...
Risk Advisor profile picture

When did Ford announce it intends to cut 14K jobs? Or is that old news?
RickJensen profile picture
@Risk Advisor
It's about the total involved the 5 year plan. It stated with about 8,500 and last count I'm pretty sure was over 14K. But that's years worth of job cuts, so "old" and some not. It adds up to over $1B per year.
I just don't believe that most car buyers are going to go out and immediately buy all of these electric vehicle models. They are much more expensive. While it is true that the growth rate of EV's is high, the base is small, and they continue to be a small percentage of total sales...for good reason. I think the evolution to electric is going to take much longer than many people currently estimate. This will leave automakers struggling to recover their significant investments. I am not long F or GM.
RickJensen profile picture
What you don't understand is that the introduction of these new vehicles is NOT at maximum production. It is just the opposite. They have targeted enough supply, to keep the prices high, make a great profit and do so while waiting for broad general acceptance and finally manufacturing at scale with new technology.
Sambo Neube profile picture
@RickJensen great profit, what are you smoking. they loose 10-12K on an EV truck on avg.
@RickJensen I disagree with the supply comment. There are 17 dealers within 25 miles of me and they have 154 Mach E models and only 38 Mustangs in inventory. There seem to be plenty of Mach E around to buy. I believe Ford has sold around 11k Mach E and over 31k Mustangs in 2021. They sold 60-70K Mustangs in each of the prior three years. In my view the EV Mustang is available but customers are choosing the Mustang 3:1 over the EV. EV will happen but its going to take time and the costs need to come down.
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