Nasdaq F Ford

"Undervalued" and "electric vehicle makers" are terms that typically don't belong in the same sentence. Even if the shares of electric vehicle (EV) stocks are down relative to their recent highs, that doesn't always make them cheap or undervalued.

Ford Motor’s (NYSE:F) strategy to strengthen its product portfolio, ramp up the production of battery electric vehicles, and continued investments in growth opportunities have made it more competitive. However, industry-wide supply constraints, chip shortages, and macro and geopolitical headwinds are taking a toll on automakers, including Ford. 

Given the ongoing challenges, Ford delivered March sales numbers that continued to decline on a year-over-year basis. Notably, Ford’s total U.S. sales came in at 159,328 vehicles in March, down 25.6% versus the prior-year period. This didn’t sit well with investors. Ford stock closed about 5% lower on Tuesday. Meanwhile, it has reversed its gains and is down over 23% year-to-date. 

Now What?

Recently, RBC Capital analyst Joseph Spak reduced his U.S. auto demand forecast for 2022. Spak expects industry-wide supply challenges to continue, while macro headwinds could impact demand. Spak has a Hold recommendation on Ford stock.  

During the Q4 conference call, Ford’s CFO, John Lawler, stated that the supply constraints would remain fluid through 2022, with Q1 taking a hit due to supply shortages. Moreover, he expects commodity headwinds of $1.5–$2 billion. 

Speaking at an auto conference organized by Exane and Jefferies, Hans Schep, Ford’s General Manager for European commercial vehicles stated, “We still will see shortages in ’22, specifically in the first half, maybe even through to ’23.”

Wall Street’s Take

Along with Spak, Citigroup analyst Itay Michaeli also remains sidelined on Ford stock. Citing Ford’s exposure to Europe, Michaeli lowered his price target on Ford to $18 from $23. 

Overall, analysts remain cautiously optimistic about Ford stock. It has received six Buy, six Hold, and two Sell recommendations for a Moderate Buy consensus rating. Meanwhile, the average Ford Motor price target of $21.79 implies 37.7% upside potential to current levels.

Final Thoughts

Ford’s improved product mix and strong pricing environment will likely support its financials in 2022. However, ongoing supply constraints, higher commodity costs, and macro headwinds could play spoilsport. 

Meanwhile, Hedge Funds have been offloading Ford stock. Per TipRanks’ Hedge Fund Trading Activity tool, hedge funds have sold 21.9M Ford shares in the last quarter. Further, according to our data-driven stock score, Ford stock has a Neutral Smart Score of 5 out of 10.

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