Ford Motor (NYSE:F) stock is up 105% in the last year, moving from $7 to its current price of more than $14.
It has been powered by the continuing success of its trucks, on big expectations for electric cars, and the political support of the new administration. CEO Jim Farley insists .
They should. Even with their recent run-up, Ford has a market cap of just $56.5 billion, and a price-earnings ratio under 17. Tesla (NASDAQ:TSLA) is worth over 10 times more, even while Ford’s sales are still 3 times higher than Tesla’s.
Catalysts Converging
There are three catalysts for Ford’s head of steam.
First, During the second quarter, ending in June, Ford earned $561 million, 14 cents per share, on revenue of $26.75 billion. Sales were up 38% from a year earlier, although profits were down on higher costs.
Second is the turn to electrics. Ford bragged in the second quarter release about its Mustang Mach-E and F-150 Lightning electrics, built around bodies that had been popular with gas-powered cars. The Lightning already has 120,000 reservations.
Third is the support of the Biden administration. The president himself the Lightning in May. He has proposed for electrics made in the U.S., by union labor, with U.S.-made batteries. The goal is for half of U.S. cars to be electric in 2030, .
Politics Diverging
Whether Ford will give Biden everything he wants is open to question. Ford is investing heavily, j.
The company recently announced it is building four new plants to support electrification, . Farley said the sites were chosen because they’re meaning there will be no clean-up costs from older plants. They’re also much larger than Ford’s 20th century plants, like River Rouge.
Politicians in Kentucky and west Tennessee are already the expected growth. The announcements gave Ford stock in a week where the average S&P 500 stock lost 3%.
The United Auto Workers union will try to organize the plants, saying Ford has
to support them. Whether it can succeed in the anti-union area is uncertain.
Tesla CEO Elon Musk, who is notoriously anti-union, has which employs union labor. Tesla shares dropped $20 each in the days after the Ford announcement.
Analysts Are Cautious
So far analysts are cautious about the Ford plan. Tipranks only counts nine Ford analysts, and while. CNN counts 20 Ford analysts, also with .
Bulls like Mike Ward of Benchmark say Ford stock could advance . Bears say the stock price has risen .
The Bottom Line For F Stock
I invested in F stock during the reign of Farley’s predecessor, Jim Hackett. I lost money.
The big bet on electrics, however, based on cars that are already good sellers, has me .
. Electric cars have few moving parts. Motors can be of any size. There are no transmissions. People will be able to scale their need for mobility. It’s unclear whether future transportation will be sold as . Cars sit in garages most of the time, and electrics can run all day.
No car company, not even Tesla, has yet to grapple with this potential reality, that we could go electric without a car in the driveway. That makes me skeptical of Ford. The electric boom could easily bust.
On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
has been a financial and technology journalist since 1978. He is the author of available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at . He writes a Substack newsletter, , which covers technology, markets, and politics.
