Is Ford's Revenue Enough to Juice its Stock Price?

Key Points

• Ford reports growing EV sales as evidence that its strategy is working. 
• Overall revenue is still below pre-pandemic levels, suggesting that "getting back to normal" won't happen overnight.
• Ford stock looks more like a short sell opportunity than a long-term investment. 

The market has an upward bias, and it's as good a reason as any for Ford Motor Company (NYSE: F) stock to climb over 8% in the week ending October 5. The company’s outlook for electric vehicle (EV) sales may be getting investors excited. According to the company, EV sales climbed nearly 200% (197%) and the company’s market share rose 3.1 percentage points. 

Adding fuel to the fire, Morgan Stanley (NYSE: MS) upgraded its rating on Ford stock from "equal weight" to "overweight" and gave Ford stock a price target of $14. But the stock only got the tiniest of bounces from that news. 

This combination may be why traders see opportunities. But the overall revenue picture may hinder the jolt investors have given the stock. It’s fair to say that the company may have lowered expectations to the point where it can’t help but leap over them when it reports earnings in late October. Ultimately, the Ford stock forecast might leave investors wishing for more.

The Revenue Numbers Suggest Normal is Some Time Away 

On October 4, Ford announced that its September sales came in below expectations. The company was also lower on a year-over-year basis (142,644 vs. 156,614 in the prior year). The report came approximately two weeks after the automaker announced $1 billion in unanticipated supply chain costs. 

Ford’s first half revenue is lower than 2019. The last two years have been anomalies for every automaker so 2019 is a more important comparison point when looking at Ford.  

Ford’s revenue is expected to grow at a pace of approximately 7% over the next five years. However, investors may want to wait a quarter or two to see if those numbers adjust to reflect the macroeconomic headwinds in the economy.  

One area those headwinds may affect the company’s numbers occur in earnings. Right now, Ford’s earnings are well above pre-pandemic levels, which would support stock price growth, right? However, this is Ford’s highwater mark in terms of earnings per share, which are expected to decline by 2.5% over the next five years.  

Investors Will See What They Want to See 

As investors see more electric vehicles on the road, it will stir interest in EV stocks. Investors may believe that if they wait for Ford to show them the sales and earnings numbers, they will miss out on gains. However, the macroeconomic outlook suggests that automobile demand of all types will play out as expected.  

Right now, Ford stock looks more like a trade than an investment. If you’re inclined to trade options or engage in short selling, you might find an opportunity. Ford stock is cheap but it may not look as cheap as the economy begins to reflect the effects of rising interest rates.