Ford Has All the Tools to Dominate the EV Market
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Ford's EV ambitions are lofty, but it has the resources to see its plans past the finishing line, pushing F...
The shares of automotive giant Ford (NYSE:F) have enjoyed healthy gains in the past 12 months. Indeed, F stock has exhibited excellent momentum, generating over 100% returns in the past year.
Still, the stock remains attractively priced across virtually every metric. Moreover, since the automaker is poised to have an incredible 2022, it would be best to scoop up the stock at its current levels.
The auto sector’s semiconductor shortage is easing, as shown by Ford’s stellar third-quarter results. And the headwinds created by the pandemic are fading fast, greatly improving the outlook of Ford’s fundamentals.
A seasoned veteran in the automotive world, Ford plans to become a juggernaut in the EV realm. The company believes that it could become the second leading EV producer within the next couple of years. Moreover, its EV results and future prospects suggest that this goal is likely to become a reality.
Ford’s EV Future
It’s no secret that Ford is going all-in on EVs. Given its reputation, its highly ambitious goals in the sector aren’t surprising.
The company plans to eventually become the top EV producer, and its CEO, Jim Farley, has already announced plans to double its initial production targets for 2023.
Although the company didn’t deliver a single EV last year, it plans to spend over $25 billion on electrification, including the production of battery cells, through 2025. By that year, Ford plans to develop 141 gigawatts of battery production capacity. That should be enough to produce 1 million EVs per year.
Ford boasts an incredible lineup of EVs, including a couple of models that it intends to roll out next year. Meanwhile, the sales of its existing EV models have been booming.
In November, the sales of its EVs, including its hybrid models and the Mustang Mach-E SUV, jumped 154% year-over-year to 11,114. The Mach-E received rave reviews from automotive critics when it was released in 2020.
Further, during the automaker’s third-quarter earnings call, it revealed that roughly 90% of Mach-E buyers would recommend that others purchase the vehicle.
Ford will be releasing its highly anticipated F-150 Lightning pickup truck and a lower-priced, hybrid version of Ford Maverick next year.
Both models have generated healthy demand so far. Close to 200,000 reservations for the F-150 Lightning truck had been made as of November, while there were 100,000 reservations for the Maverick as of August.
Strong Cash Flows
Ford has generated robust cash flow in the past decade. From 2011 to 2016, its free cash flow grew by a colossal 133%. Though its FCF growth wasn’t as impressive in the following years, its FCF is still quite high.
With the semiconductor shortage in its rear-view mirror, Ford’s free cash flows are expected to ramp up significantly next year. Specifically, it expects to triple its free cash flow.
Nevertheless, Ford is facing plenty of risks that could undermine its performance. For starters, Ford’s supply chain troubles aren’t over yet, and the chip shortage could still lower its production to an extent.
On top of that, inflation will cause prices of its raw materials to increase. negatively impacting the company’s bottom line. Further, new Covid 19 variants may pose additional challenges for the company.
The Bottom Line on F Stock
The stock has performed spectacularly lately, and all indicators suggest that it will do even better in 2022, when EVs will be a major theme in the stock market.
Ford’s efforts in the EV sector so far have been stellar. As a result, F stock can climb massively, and investors should look to grab the stock while it trades at a relatively low valuation.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
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