Ford shares hit a 52-week low last week amid supply chain worries. Is the stock a buy?
Ford (NYSE:F) shares hit a 52-week low last week, despite high demand for both its EVs and traditional gas-powered cars. The company has faced supply-chain problems that have complicated production. At the same time, investors have recently worried about the impact of high gas prices and shaky prospects for consumer spending.
Despite these headwinds, has the Big Auto stalwart dropped enough to become a buying opportunity?
Ongoing Supply Chain Worries Cut Into Production
While shares of several of the major automakers have been pushed significantly lower over the past 30 days, Ford’s stock has been hit unusually hard, falling 16% as of Wednesday. Shares of rival General Motors (GM), in comparison, have declined 10%, while Honda’s (HMC) have slid 5% and Toyota’s (TM) 6%. Stellantis (STLA), meanwhile, has seen its shares rise 1%.
With the retreat, Ford shares also hit a 52-week low of $12.07 last week. That’s a 53% drop from the 52-week high of $25.87 they reached on Jan. 13.
In late April, Ford released a Q1 earnings report that was largely in-line with expectations, but included significant losses connected to its investment in EV maker Rivian (RIVN). Ford also reported that chronic supply chain problems had dragged down earnings by slowing production despite strong consumer demand for its vehicles.
Ford shares began a multi-session slide on May 5 after it reported that April sales had declined 10.5% year-over-year to 177k vehicles for the month. It noted that sales of EVs had shot up 50% to 17K vehicles.
The stock dipped again on May 12 after it was revealed that Ford had unloaded a significant chunk of its Rivian stock. Shares were also put under pressure by a lowered forecast from rival Toyota and a downgrade by Wells Fargo, both of which referenced chronic supply chain problems in the auto sector.
Is F a Buy?
Morgan Stanley, which recently raised its rating on Ford to Equal Weight, said in a note dated May 18 that it believes Ford will have to revise down its EV forecast due to ongoing supply chain issues. A delay in EV rollouts, however, would be countered by increased demand for old-school internal combustion engine, or ICE, vehicles.
“We believe investors may be underestimating the ‘longevity’ of Ford’s ICE profitability which is driven by strong demand relative to supply for ICE vehicles and an inability for the industry to produce sufficient quantities of EVs through the middle and later part of this decade,” the analysts wrote.
Tigress Financial Partners, meanwhile, reiterated its Buy rating in a note dated May 20, citing “strong demand” for Ford’s ICE F-series trucks and SUVs that it believes will fuel near-term revenue while “its aggressive electrification investment initiatives will drive long-term share price gains.”
Wall Street analysts, on average, rate Ford a Hold. Of the 24 analysts tracked by Seeking Alpha, nine rated the stock a Buy or Strong Buy. Half the total view the stock as a Hold and three have issued a rating of either Sell or Strong Sell. SA authors, on average, have a Buy rating on Ford.
Seeking Alpha’s Quant Ratings give a rosier assessment, seeing the stock as a Buy. As of midday Wednesday, the company had received an A+ for profitability, an A for growth, A- for valuation, B+ for momentum and a C for revisions.
For a more in-depth view of Ford, check out SA contributor The Asian Investor’s “Ford Is Finally Addressing Its Rivian Problem” or Juxtaposed Idea’s “Ford: Potential $32B of Enterprise Value Recovery in H2 Aided by F-150 Lightning”.