Ford Motor Company (NYSE:F) expected to double down on cost restructuring before considering fallout
Ford Motor CompanyThe stock revitalization of (NYSE:F) in 2021 was one of the biggest stories of the year. Flying high on the electric vehicle turnaround as well as a promising stake in Rivian, the company hit the market capitalization of US$100 billion for the first time.
Still, a 30% drop that took the stock back to a single-digit P/E makes it necessary to look at the current situation.
Check out our latest analysis for Ford Motor
Fourth Quarter and Full Year 2021 Results
- Non-GAAP EPS: $0.26 (missed $0.15)
- Income: $37.7 billion (beaten by $2.08 billion)
- Revenue increase: +4.7% over one year
- Turnover for the financial year: US$136.34 billion
- Sold 1.9 million cars and trucks in the United States in 2021 (down 7%)
- Chip shortages led to production targets not being met
- FY2022 EBIT forecast: US$11.5 billion to US$12.5 billion
- EV will represent at least 40% of the product mix by 2030
Although the market reacted negatively, as usual it was little with missed gains and more with muted indications. Although the guidance range is only US$1 billion, it still leaves room to beat the consensus.
Meanwhile, the company is focusing on cost containment through design innovation, vertical integration and production scale optimization. According to earnings call commentary, for the Mustang Mach-E, that could be as much as US$1,000 per vehicle — a significant number given the traditionally thin margins in the auto industry. This allows the company to reap higher profits during high demand and flexible pricing during possible turbulence.
Although there are spinoff rumors, CEO Jim Farley recognized that BEV (Battery Electric Vehicle) and ICE (Internal Combustion Engine) vehicles have fundamentally different approaches.
Is Ford Motor still cheap?
According to my assessment, the intrinsic value of the stock is $29.20, which is above what the market values the company at the moment. This indicates a potential opportunity to buy low.
However, this contrasts with some institutions that have recently lowered their price targets for Ford. Deutsche Bank now sees it at US$21 (from US$24), while RBC Capital Markets is reducing it to US$22 (from US$24).
What’s more interesting is that Ford Motor’s stock price is quite volatile, giving us more of a chance to buy since the stock price may go down (or up) in the future. This is based on its high beta, which is a good indicator of how the stock is doing relative to the rest of the market.
Can we expect growth from Ford Motor?
Investors looking for portfolio growth may want to consider a company’s prospects before buying its stock. Although value investors argue that it is intrinsic value relative to price that matters most, a more compelling investment thesis would be high growth potential at a cheap price.
With profits expected to more than double over the next two years, the future looks bright for Ford Motor. It seems that a higher cash flow is expected for the stock, which should translate into a higher valuation of the stock.
What does this mean to you :
Are you a shareholder? Since F is currently undervalued, you might consider increasing your bet. With some positive developments like cost savings, it seems that growth has not yet been fully priced into the stock price. However, other factors such as financial health should be considered, explaining the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on F for a while, now is the time to be on high alert. Yet, if you are not a long-term investor, consider the technical outlook as well. So far, the price shows no signs of bottoming out. Before making investment decisions, consider other factors such as the results of its management team to make an informed opinion investment decision.
If you want to know more about Ford Motor as a company, it is essential to be aware of the risks it faces. Know that Ford Motor shows 3 warning signs in our investment analysis and 1 of them does not suit us too much…
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Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position at any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials.