What to Make of Ford’s EV Push?

Ford Motors Company (F) is a veteran in the automobile space. The company had an incredible run in 2021, after executing its highly demanded EV strategy.

It was only recently back in April 2020; the company was trading below $5 and was considered a penny stock while now there has been a significant improvement in its valuation.

Ford Stock is still quite attractively priced and as the company is expected to have an incredible 2022.

Ford has three major operating segments: The Automotive segment that sells different vehicles under its own brand, the Mobility segment aids in designing and building mobility services, and the Ford Credit services segment that primarily arranges vehicle-related financing and leasing activities with the automotive dealers.

Ford has been in the automobile space for quite a long time. The company has one of the best successful turnaround stories in corporate America at present.

Adapting its operations successfully to cater to the current market demand is one of the best decisions taken by Ford. The seasoned veteran therefore began the new year with new optimism by redesigning its operations to compete in the era of smart vehicles and clean energy.

As the EV market is booming like anything this turnaround seems to have been working in favor of the company, thereby bringing gigantic returns for its investors. 

Dan Levy of Credit Suisse had also shown optimism about the Ford Stock sometimes back. He had highlighted the potential of Ford to benefit from the improved fundamentals it had achieved and from the new opportunity it has gained from the EV/AV/digital space.

He believes Ford’s third-quarter results are quite encouraging, and can bring better than expected earnings power for the company in the years to come. 

Rising Demand for EVs

The global EV market is booming at present. As people’s concern for the environment is rising, more and more people are opting for clean energy sources and this has given the demand for EVs across the globe a significant boost.

The global EV market was valued at $162.34 billion in 2019 and is expected to reach $802.81 billion by 2027, growing at a CAGR of 22.6%.

Ford plans to eventually become the top EV producer. Ford’s EVs have already started witnessing a surge in demand. On December 3, 2020, it was revealed by the company that it already has nearly 200,000 retail reservations for the F-150 Lightning, and plans to start converting these reservations to full orders in January 2022. 

Moreover, the company also plans to spend over $25 billion on electrification, including the production of battery cells, through 2025.

Further, Ford has also decided to ramp up the production of its Mustang Mach-E. As per the intended plan, it will be producing more than 200,000 units of EVs per year by 2023 for North America and Europe. With this, the company will be able to get a much better hold on the EV market.

Strong Financials

Ford has generated strong cash flows over the past decade. However, in recent years its growth was not that impressive but still relatively high.

The pandemic effect coupled with the shortage in chips had hindered Ford’s overall performance to some extent. The company’s net income came down at $1.8 billion in the third quarter of 2021, compared with the $2.4 billion achieved a year ago.

The revenue for the quarter was also down 5% year-over-year. Ford sees the full-year 2021 adjusted EBIT to be $10.5 billion to $11.5 billion, up from $9 billion to $10 billion it expected earlier. 

Ford earns a Moderate Buy consensus rating on TipRanks, based on eight Buys, seven Holds, and three Sells assigned over the past three months.

The average Ford price target of $23.12 suggests 14.1% upside potential.

The EV market holds immense growth potential. Fords latest EV offerings are considered a masterpiece for all the clean energy buffs. In the U.S., Ford has already been able to take over General Motors in EV sales.

The company is making additional efforts now to position itself as the undisputed leader in this booming space. Moreover, being a veteran in the automobile space has given the company several competitive advantages.

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