An 8% jump on Thursday was enough to make shares of car maker Ford (
NYSE: F) among the best performing on the S&P 500 index. It means they’re now up the guts of 40% on the year already and more than 200% since last March. From a longer term perspective, they’ve firmly
broken out of the downtrend that has been dogging them since 2014.
The latest jump came on the back of a bullish note from Deutsche Bank, who considers them a solid buy in advance of their February earnings report. They struck an uber bullish tone in a note to clients when they said "we see potential catalysts occurring in the coming months, including a solid 2021 outlook on its 4Q earnings call (2/4), the launch of a number of key models under its new executive leadership team, and Capital Markets Day in the spring where Ford could reboot its redesign program and present a new electric vehicle strategy."
American SUV Of The Year
The seemingly ever increasing hype around electric vehicles played a large role in last year’s rally and looks set to be the dominant factor in any future gains. Ford’s Mustang Mach-E hit the showrooms in December and picked up an “American SUV of the year” award. It signals an exciting new departure for the company, traditionally most well known for their F series of pickup trucks. They expect the average buyer of their Mach-E and other electric vehicle models to be a first time Ford buyer, meaning they’re planning to tap into a fairly brand new market.
A new market for sales is badly needed too, as their flagship F-150 continues to lose its place at the top of the podium, with Q4 sales down more than 30% year on year. But as vice president Andrew Frick said with the report, the “fourth quarter represented an inflection point at Ford in our transition from cars to a much greater focus on iconic trucks, SUVs and electric vehicles to better serve our customers. We began to see our strongest evidence of this in December with retail sales up 5.3 percent with the launch of our new F-150, Bronco Sport and Mustang Mach-E. We are well positioned to see the benefits of our focused efforts throughout 2021.”
New Departure
It seems that Wall Street has no problem getting behind the transition, with shares printing now firmly back into double digit territory and at their highest levels since 2017. While they might be starting to look a little frothy after the recent run, the RSI is above 80, there’s a sense that Ford is in the middle of a massive pivot and investors are still figuring out what this means for the share price.
They might be a little late to the electric vehicle party, considering Tesla (NASDAQ: TSLA) has been on their radar for a decade, but they’ve finally arrived and it will take some dour news to take the hype and steam out of this rally. If Tesla shares can pop more than 1,000% in a year and send their price-to-earnings ratio to above 1,600, then surely Ford can be given some wiggle room.
It arguably has the least valuation risk of all the automotive names making forays into the electric vehicle space and is finally enjoying a run of good news and momentum that looks set to continue for some time yet.
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