U.S. major automobile manufacturer
Ford Motor Company NYSE: F stock has recently rallied on the
electric vehicle (EV) momentum that has finally flowed from
first movers like Tesla NASDAQ: TSLA into the
traditional U.S. automakers lead by
General Motors NYSE: GM. Shares up over 25% year-to-date (YTD) and vastly outperforming the benchmark
S&P 500 index NYSEARCA: SPY. It’s been no secret that U.S. auto makers are gearing up for the EV revolution. The new Biden administration and global decarbonization initiative literally mandates it. Up until recently, traditional automakers were assigned traditional valuations while EV makers and startups trade at crazy multiples. The market has reassessed and decided to apply an EV premium to traditional automakers. Aside from the
electrification of upcoming models, Ford also owns a stake in a much anticipated EV maker, Rivian. Despite the large YTD run up, shares are still cheap when applying the EV premium. Prudent investors can monitor opportunistic pullback levels to scale into positions.
Q3 FY 2020 Earnings Release
On Oct.28, 2020, Ford released its fiscal third-quarter 2020 results for the quarter ending September 2020. The Company reported an earnings-per-share (EPS) profit of $0.65 excluding non-recurring items versus consensus analyst estimates for $0.18, a 0.47 beat. Revenues rose 1.4% year-over-year (YoY) to $37.5 billion beating analyst estimates for $32.9 billion. Ford provided its “expectations” for fiscal Q4 2020. The Company anticipated Q4 EBU between breakeven and a (-$500 million) loss. The Company expects lowered F-150 trucks by (-100,000) due to a “measured” ramp-up in 2021. The Company expects positive adjusted EBIT for full-year 2020. Costs associated with its Mustang EV and lowered EBT from Ford Credit.
Conference Call Takeaways
Ford CEO, Jim Farley, stated, “Ford in not only in front of developing electric transit in F-150, we also have an unmatched dealer base to provide that anywhere service or great uptime for our customers… You’re going to see our strategy of electrifying our leading commercial vehicles and our iconic high-volume products expand very quickly at Ford.” The Company has built out four EV capable plants in the U.S. and an all-new carbon neutral factory in Rouge. Ford reached an agreement with Canadian Auto Workers Union to future electric SUVs to be built for Canada. Ford Credit had the strongest performance in 15-years with an adjusted EBIT of 9.7%, resulting in generating $6.3 billion in adjusted free cash flow. The Company repaid the entire $15 billion credit facility and ended the quarter with nearly $30 billion in cash and $45 billion in liquidity.
Rivian Stake
Private EV truck maker Rivian Automotive LLC raised $2.65 billion in January 2021, bringing its valuation to $27.6 billion. Rivian is an EV startup founded in 2008 specializing in quad-motor on and off-road trucks with over 300 mile ranges, towing capacity up to 11,000lbs and 0-60 mph speeds of 3 seconds. T. Rowe Price lead the financing round along with Coatue Management and Amazon.com NASDAQ: AMZN. Amazon was one of the original investors and has also has purchase agreements for the EV trucks to be used by its delivery drivers. Funds will be used for the launch of three EV vehicles in 2021. Ford took a $500 million stake during Rivian’s prior $5.35 billion financing in five different rounds dating back to 2019.
Mustang Mach-E Vehicle Rollout
The Ford’s Mach-E Mustang EV model will be ramping up deliveries in 2021. While some have been delivered in 2020, the Company is performing quality checks on several hundred EV Mustangs for delivery. It also won Best SUV of 2021 of 2021. Keep in mind this model qualifies for the $7,500 EV tax credit for U.S. buyers that make it easier for consumers to transition to EV vehicles. The Company plans to roll out sales availability in Europe later this year and in the China by end of 2021. The electric F-150 will be launched in mid-2022. While most EV companies in the U.S. are still in buildout mode, the valuation risks are much higher than a big three auto maker like Ford, which has tangible valuations with operating history lead by a new CEO that has already been investing in artificial intelligence (AI) and EVs. Prudent investors seeking a more stable investment in the EV momentum backed by solid fundamentals should watch F for opportunistic pullback levels.
F Opportunistic Pullback Levels
Using the rifle charts on the monthly and weekly time frames provide a broader view of the price action playing field for F stock. The monthly rifle chart triggered a monthly mini pup spike through the $10.29 Fibonacci (fib) level. The monthly upper Bollinger Bands (BBs) sit at $12.58 with rising 5-period moving average (MA) support at $8.75. The weekly market structure low (MSL) buy triggered above $10.20. The weekly pup breakout formed above the 5-period MA at $9.59 and overshot the weekly upper BBs at $11.40. The daily market structure high (MSH) triggers below $11.34. As the weekly stochastic tries to coil back up off the 80-band, the weekly 5-period MA will continue to rise. Since momentum is very hot thanks to GM, prudent investors can look for opportunistic pullback levels at the $11.10 fib, $10.29 fib, $10.03 fib, $9.42 fib, $9.18 fib, and the $8.55 fib. The upside trajectories range from the $13.85 fib to the $15.48 fib with further upside towards the $17.65 fib. It’s prudent to keep an eye on GM stock as these two both move together.
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