Why Now Is The Time To Buy Ford
Summary
- Ford’s electric vehicle sales are surging.
- Europe is going to contribute significantly to Ford's EV transition.
- Ford’s EV production ramp is undervalued and its free cash flow is too cheap again.
Justin Sullivan/Getty Images News
Right now, there is an opportunity to start, or double down on, an investment in Ford Motor Company (NYSE:F). The car brand is accelerating its transition to becoming a full-fledged electric vehicle (EV) manufacturer, and new product launches this year could power shares of Ford materially higher. Additionally, Ford is accelerating its push in the electric vehicle market by targeting about 600,000 electric vehicle sales just in Europe by FY 2026. As new electric vehicle models go on sale this year, Ford is set for a major revaluation!
Strong electric vehicle sales in February
Ford’s electric vehicle sales are surging, but I believe the market still fundamentally undervalues Ford's electric vehicle potential. The car brand is gearing up to launch new electric vehicles this spring and customers, based off of reservations, seem to be eager to take Ford’s newest slate of electric vehicles off the company’s hands.
Ford is making serious inroads into the electric vehicle market in the U.S., and the density of its product lineup is increasing. The car brand just launched its new E-Transit in February, which is seeing rapid customer uptake from both small and large commercial companies. These buyers placed more than 10,000 orders with Ford for the E-Transit, ensuring that the firm’s newest electric truck solution is receiving a warm welcome.
In total, Ford sold 129,273 vehicles in the U.S. in February, of which 8,984 units were electrified vehicles. Electrified vehicles, based off of Ford's definition, include both battery powered vehicles as well as hybrid models, such as the Ford Escape. Ford’s electric vehicle sales in February represented a 7% share of total sales, and the electric vehicle share is set to go up dramatically until FY 2026 which is when Ford expects to produce 2M electric vehicles annually.
Ford
Ford’s total electrified vehicle sales surged 55.3% year-over-year in February. Ford's current EV lineup consists of the Mustang Mach-E SUV, the E-Transit, the Maverick Hybrid, and various other hybrid passenger sedan models. The F-150 Lightning, which is coming to market this spring, is set to make a big impact on Ford’s EV sales as the model has amassed more than 200,000 reservations so far.
Europe is becoming central to Ford’s electrification plans
Ford has said that it wants to grow annual EV production to 2M units by FY 2026, and Europe is going to play an important part in Ford’s growth plans. Ford wants to produce and sell 600,000 electric vehicles just in Europe by FY 2026, which calculates to a roughly 30% share of expected global electric vehicle sales. To accomplish these sales goals, Ford is going to increase the density of its product lineup in Europe through the introduction of the E-Transit next quarter and six other EVs. Ford is accelerating its EV transition with heavy investments in Cologne/Germany, where the car brand is investing $2.0B to bring new EV models to market.
Tremendous free cash flow value
Shares of Ford have corrected lately and are now trading 36% below the January high of $25.87.
The drop has made shares of Ford significantly cheaper, especially its free cash flow. Ford projects free cash flow of $5.5B to $6.5B in FY 2022 which now calculates to a free cash flow multiplier factor of 10-12 X. I believe Ford's free cash flow is undervalued as the firm ramps up EV production in Europe and the U.S.
Risks with Ford
The biggest short term commercial risk for Ford, as I see it, is a potential botched market introduction of its various electric vehicle models. The car brand is bringing to market the F-150 Lightning truck this spring and the E-Transit just launched in February. Safety recalls or poor reviews could hurt the image of Ford’s electric vehicle lineup and result in weaker than expected sales going forward.
Also a risk for Ford and the stock is the supply chain crisis, which could impact electric vehicle production, especially if computer chips remain in short supply. Should the supply situation get worse in FY 2022, Ford may be forced to idle plants again and fail to deliver strong sales results this year. What would change my mind about Ford is if the company were to see a steep drop-off in pre-orders for its various electric vehicle models.
Final thoughts
This is the perfect time to buy Ford: shares have declined 36% from their all-time high and I believe the correction creates an opportunity to buy into one of the greatest transformation stories in the auto industry at a very low FCF valuation. Ford is set to become an all-electric car brand, possibly by the end of the decade, but the firm’s valuation still doesn’t show it. Ford’s heavy investments in its European electric vehicle capabilities are underrated and will play a crucial part in Ford achieving EV dominance this decade. I believe the risk profile heavily favors an investment in Ford as the car brand gets ready to roll out new products!
This article was written by
Analyst’s Disclosure: I/we have a beneficial long position in the shares of F 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.
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 (111)
"It is going to be electric public mass transport. Buses, trollies and light rail for away from home. "
IMO, not so much. COVID changed everything.
I'm not saying I'm right. It's just that's where I'm putting my money.
EU infrastructure is uniquely set up for standardization. They have much smaller distances and much higher density.
In the US, not so much.
No it isn't. You pay $22.82 for every dollar in sales.
With F you pay, .45, not even a dollar. You are buying 50.7X as much for each dollar of profit generated.But that's a Tesla bull for you, only watch price and units. Don't bother looking deeper, because you won't like the fundamentals.
Ok lets do this...@WillLong
"Sorry, I am correct. BEVs on average can last longer."
--You can't know that (as usual). You would have to know how many are out there with resistive heating vs heat pump. Now you didn't know that, but I do.
Whether you try to change what you said "on average", and anything with no basis, and no DD, just shows, you made it up.
So, then you throw down again with "Model S or X can last 200 hours".
Just make it up, no details, no basis.
"Tesla moved away from the resistive heater, which uses a heating element that converts electrical energy into heat, in the Model 3, the Model Y’s sister vehicle."
"Based on his test, he concluded his 2019 Model 3 without the heat pump required 2,170 watts to maintain the temperature. The new 2021 Model 3, on the other hand, needed only 735 watts."
"75 kWh battery pack size, at 735 watts per hour, is exactly 102 hours (To a dead battery)"
"That is why a Model S or X can last 200 hours and no ICE can do the same."
So since you lost the "facts" argument, you decide to change what we were talking about. Now it's just 2 cars,....... and not EVs.
Now to the 200 hours.
"Our Tesla Model 3 can keep its interior at 65 degrees for almost two days max, losing an average of 2.2 percent of its charge per hour, which is barely less than a gas-powered car."
2 days is not 200 hours. Specifically:
"it could theoretically last a maximum of 45.1 hours, or just under two days."
Then comparatively:
The Tesla, couldn't even keep up with a ICE Hyundi Sonata.
The Hyundi could idle for 51.8 hours and the Tesla for only 45.1.
(hips.hearstapps.com/...)
You simply make it up as you go along. As I said " you selectively pick only the optimal, and present it as a standard." Then you change the argument.
"To be clear- An ICE can idle on a full tank of guess for about 30 hours. A BEV can do it for 200+ hours in moderate temps, and still signifigantly more than an ICE in really cold temps."
Now a smart person would stop here. " At least Gruss, when proven wrong, has the decency to go away with his tail between his legs and be quiet."
Let's see what happens here. Keep digging that hole???
Apr 5, 2022. 12:57 PMLink
The best advice I got was from a NASA specialist.
He said you test for just 3 failure modes.
1. The likely
2. The unlikely
3. The impossibleI couldn't stop all the issues. You just try to minimize them.
