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F – to pay your respects. FORD DD

Summary:

Stock has been beaten down, and revenue has been in a rut the last few years but their staple lineup of cars have undergone a refresh and has renewed consumer demand. The company is also in a great financial position to weather a storm. It’s biggest risk is the chip shortages and reliant on a third party vendor for their batteries.

**PROS:**

*Product*

The F150 has been the best selling vehicle 43 years in a row. With the EV revolution, it isn’t going anywhere with the introduction of the F150 lightning. 100k reservations so far, set to release sometime next year. I encourage you to look at the product and see how it appeals to both Truck and EV fans equally.

Ford also refreshed their lineup. They’ve scrapped underperforming vehicles like the Fusion and the MKZ while introducing the new Mach-E, Bronco, Mustang and updated the rest of their SUV fleet (36% growth yoy). Ford certainly has kept up with the times and consumer preferences.

*Stock Momentum*
The shorts have already left after riding it all the way down to $5 a share. The consensus was the stock has over 4B outstanding shares and has really diluted it. Ford stopped its dividend when Covid hit, and stock has been in an upward rally since going 100%+ since its 52W low.

*Valuation*
Forward P/E of 7.63. Same range as the other Auto Dinosaurs like GM, Honda etc. He who must not be named has a P/E of 105. I believe Ford at a $56B market cap, with $25B of it in cash is severely undervalued. We see other electric companies like Lucid/NIO/XPeng/Li balloon to the same market cap as ford with some not even delivering a single vehicle.

**CONS:**
*Chip Shortage*
Ford has had to halt production of the Bronco because of this. But the only silver lining is that Ford isn’t alone in this. The entire Auto Industry is affected.

*Batteries*
Ford Does not currently produce its own batteries. With the surge in demand, they need to vertically integrate this as fast as possible. Its perhaps one of the most important focus Ford needs to do so they are not reliant on third parties. A joint partnership with South Korea’s SK Innovation plans to build these with Ford by 2025.

*Competition*
Luckily, the other EV and automakers don’t have Trucks that can realistically oust the F150 from its pedestal. But Cybertruck has 1Million Reservations vs 100k with F150 Lightning. Granted it had first to market advantage. But curious how many of those reservations actually get filled. As for commercial vehicles goes, Amazon has backed the private company Rivian. Can they all coexist? Or will the others gobble up the market share?

Disclosure: have no business relationship with F but I have a long position in Ford. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. This is not financial advise.

What do you think?

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29 Comments

  1. I think the steel shortage will really limit any gains to be made on this play for the rest of 2021. Not saying it won’t be marginally profitable… but hard to see it being very profitable. To me the risk doesn’t match the reward. The chip shortage is all over the news, but the steel shortage is really a threat to growth. If on the other hand steel import terrifs are removed that could be a bullish catalyst for companies like these, that use so much.

  2. I actually put some cash in Ford a couple weeks ago. Strong push for electric, great infrastructure, and literally 1/50th the cost of Tesla. But that’s not quite a good DD

  3. The average F150 owner wouldn’t be caught dead in a Cyber Truck. The real question is whether or not Ford can convince many of those F150 owners to make the switch to an electric truck.

  4. I’m very bullish on Ford. I own 200 shares and have been selling covered calls for months. They are very forward thinking and are leaning heavily into EV. I can’t get behind TSLA because of my extreme hatred of musk but I’m all in on Ford. The biggest thing holding them back is the super conductor shortage. When (not if) they get past that it’s all good baby.

    TLDR buy ford!

  5. Their brand is huge in the south where EVs are for pussies, I think they’ll do well in that space. Also the new F-150 seats go all the way back so you can get blown way easier

  6. F is overvalued right now. – jumped on because ‘electric car’.

    Earning will answer – how strong consumers value/trust the Ford brand

    Are consumers simply waiting for Ford to come out with an electric? How strong is that brand loyalty?

  7. The cyber truck is expensive and is a joke as a truck. The F150 EV will 100% get bought by the government for work vehicles, and thats when we really start to see Ford soar. Now they just need to make an EV police vehicle and we will start seeing the shift.

  8. I appreciate the DD. The most I have made on F is like 25% on long positions… any weeklies I have tried expired worthless. It’s just such a flailing company to begin with and really difficult to get too excited about. I do hope your long positions pay off…anyone that bought a year ago should be sitting pretty.

  9. Can we talk for a second about how I don’t want anything ford makes? The focus st, focus rs and mustang are the only ok cars in their line up and other than the mustang there is way better value for money out there. Their trucks are a joke, 3 tones of plastic that are impossible to park and the new pumas that are coming out are a very expensive joke when you could buy a Mazda cx3 turbo like a normal person.

  10. >Disclosure: have no business relationship with F but I have a long position in Ford. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. This is not financial advise.

    [EYE ROLL]

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